Relax the restrictions on the amount and proportion of equity investment, and expand the pilot scope of financial asset investment companies.

On the evening of September 24th, the National Financial Regulatory Administration issued the "Notice on Doing a Good Job in Expanding the Pilot Work of Equity Investment by Financial Asset Investment Companies" (hereinafter referred to as the "Pilot Work Notice") and the "Notice on Expanding the Pilot Scope of Equity Investment by Financial Asset Investment Companies" (hereinafter referred to as the "Pilot Scope Notice"), expanding the pilot scope to 18 cities and appropriately relaxing the restrictions on the amount and proportion of equity investment, and optimizing the assessment mechanism.

Since 2020, financial asset investment companies under large commercial banks have explored paths, accumulated experience, and trained teams through early equity investment pilots in Shanghai, and have met the conditions for expanding the pilot.

On the same day, at a press conference held by the State Council Information Office, Li Yunze, the Director of the Financial Regulatory Administration, said that the following three measures would be taken to promote this: First, expand the scope of the pilot cities, and in conjunction with relevant departments, study to expand the pilot scope from the original Shanghai to 18 large and medium-sized cities with active technological innovation such as Beijing; Second, appropriately relax the restrictions on the amount and proportion of equity investment, increase the proportion of on-balance-sheet investment from the original 4% to 10%, and increase the proportion of investment in a single private equity fund from the original 20% to 30%; Third, optimize the assessment.

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Guide relevant institutions to implement the requirements of due diligence exemption, and establish a long-term, differentiated performance assessment.

Financial asset investment companies are non-bank financial institutions mainly engaged in the business of bank debt-to-equity conversion and supporting services.

Currently, there are five AICs in the country, which are wholly-owned subsidiaries of the five major state-owned banks, namely ICBC Financial Asset Investment Company, ABC Financial Asset Investment Company, BOC Financial Asset Investment Company, CCB Financial Asset Investment Company, and BOCOM Financial Asset Investment Company, all established in 2017.

The "Pilot Scope Notice" clarifies that the scope of equity investment pilots of financial asset investment companies will be expanded from Shanghai to 18 large and medium-sized cities including Beijing, Tianjin, Shanghai, Chongqing, Nanjing, Hangzhou, Hefei, Jinan, Wuhan, Changsha, Guangzhou, Chengdu, Xi'an, Ningbo, Xiamen, Qingdao, Shenzhen, and Suzhou.

In December 2021, the equity investment of AIC was launched: the former China Banking and Insurance Regulatory Commission issued the "Guiding Opinions on Supporting the High-Level Independent Innovation of Science and Technology in the Banking and Insurance Industry", proposing to encourage AIC to pilot the equity investment business of technology companies that do not aim at debt-to-equity conversion within the business scope in Shanghai in accordance with laws and regulations, and to establish a fault tolerance and incentive restraint mechanism that conforms to the characteristics of early and middle-stage technology enterprise investment in the equity investment business.

In June this year, the General Office of the State Council issued the "Several Policy Measures for Promoting the High-Quality Development of Venture Investment", proposing to support financial asset investment companies to steadily expand the scope of pilot regions on the basis of summarizing the experience of direct equity investment pilots in Shanghai, and to give full play to the professional advantages of financial asset investment companies in venture investment, equity investment, and corporate restructuring, and to increase support for scientific and technological innovation.

Ye Huaibin, a researcher at the Bank of China Research Institute, believes that at present, indirect financing dominated by credit still occupies the dominant position in China's social financing, and the development of risk investment and venture investment that is compatible with technology finance is still insufficient.

Expanding the pilot of financial asset investment companies is of great significance for the development of technology finance and is an important measure to encourage the development of venture investment.

At the same time, it is also conducive to further play the role of banks in the venture capital market.

Banking financial institutions are an important part of China's financial system, and their total assets account for more than 90% of the total assets of financial institutions.

In the view of market analysis, expanding the pilot with financial asset investment companies as the main body is conducive to fully utilizing the rich customer resources and risk control experience of the banking system to improve the success rate of venture capital.

Relaxation of restrictions on equity investment amount and proportion It is worth noting that the relaxation of restrictions on the amount and proportion of equity investment by financial asset investment companies is a highlight, and it is expected to mobilize more incremental funds in the future.

The person in charge of the relevant department of the National Financial Regulatory Administration said in response to reporters' questions that the "Pilot Work Notice" appropriately relaxed the restrictions on the amount and proportion of equity investment.

The proportion of the amount of equity investment by financial asset investment companies' on-balance-sheet funds to the company's total assets at the end of the last quarter was increased from the original 4% to 10%, and the proportion of the amount invested in a single private equity investment fund to the scale of the fund's issuance was increased from the original 20% to 30%.

Ye Huaibin believes that this measure expands the investment boundaries of financial asset investment companies, not only enriching the equity financing channels of technology companies from the supply side, but also effectively promoting the recovery of market confidence.

In addition, the "Pilot Work Notice" also puts forward requirements for the commercial sustainability of financial asset investment companies.

The person in charge of the relevant department of the National Financial Regulatory Administration said that financial asset investment companies need to carry out equity investment through the form of issuing private equity investment funds by affiliated institutions, and the relevant business should comply with the relevant regulations and systems of private investment fund supervision and management; to improve the risk management ability of equity investment business, establish and improve the risk management system, consolidate the risk management foundation, and effectively prevent and control various risks.