China orders banks, insurers to draft 'living wills': report

This is to ensure that troubled financial institutions won't end up needing costly bailouts.

The China Banking and Insurance Regulatory Commission (CBIRC) is now requiring sizable banks and insurers to prepare “living wills" in the event that they encounter financial difficulties, reports Reuters.

The goal for such recovery plans is to ensure that Chinese financial institutions don’t end up needing costly bailouts in the wake of risk events without contingency plans, and to maintain financial stability, the watchdog said.

Banks, rural credit cooperative and other deposit-taking institutions with consolidated assets at home and abroad of no less than $47b (CNY300b) should draft such plans, as well as insurers with no less than $31b (CNY200b) of total domestic and international on-book assets.

In addition, eligible financial institutions should first make use of their own assets and ask for help from their own shareholders before turning to the government for support, CBIRC said.

A grace period will be given for the implementation of the rules, the regulator added, without stating specific deadlines.

Here’s more from Reuters.