Long-talked about efforts to reign in risks associated with Chinese asset-management products have finally begun in earnest on Friday, as regulators announced sweeping new rules.

As Bloomberg reports, a joint statement from regulators issued by the People’s Bank of China said that financial institutions should offer yields based on net asset value of products issued which accurately reflect risks, and must cease offering implicit guarantees on rate of return. Punishment for non-compliance, the statement said, will include measures such as additional reserve requirements.

After authorities signaled their intention to break the common practice of guaranteeing payments earlier this year, Xi Jinping and top economic advisors renewed their pledge to make reigning in financial risks a priority at the Communist Party’s leadership congress last month. The popularity of the products has been supported in part by widespread perception that the government would step in to prevent huge losses.

The new rules stipulate that products can only invest in one layer of other investment products, and institutions will no longer be allowed to act as channels for each other’s asset-management products. Total leverage for both publicly-raised and private funds will be capped at 140% and 200%, respectively.

The total value of Chinese asset-management products falls somewhere around the US$15 trillion mark, according to Bloomberg, including US$4.4 trillion of wealth-management products issued by banks as well as less than US$3 trillion in plans sold by insurers, fund managers and brokerages.

As China doubles down on its commitment to reduce risk in its financial sector, a new report from UBS Group says that China’s total US$38 trillion of off-balance sheet buildup poses little or no risk to financial institutions. Despite possible threats to some lenders posed by wealth-management products, UBS analyst Jason Bedford explained, the vast majority of off-balance sheet exposure is composed of “benign, no-risk or low-risk items.”

Bedford wrote in his note, as reported by Bloomberg, that the surge in asset-backed securities “is not quite the red flag it might appear to be,” He added that “the rapid growth of securitization has occurred in a highly regulated environment and it would appear to be part and parcel of a broader opening and reform of China’s credit markets beyond bank balance sheets.”

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