China's top banking and insurance regulator announced on Wednesday it has recently allowed the wealth management subsidiaries of the country's two largest commercial banks by assets to open for business. 

The two new companies are ICBC Wealth Management Co Ltd, a wholly-owned subsidiary of Industrial and Commercial Bank of China Ltd, with as much as 16 billion yuan ($2.32 billion) in registered capital, and the wealth management subsidiary of China Construction Bank Corp, with a registered capital of up to 15 billion yuan. 

"The banks' opening of wealth management subsidiaries will further enrich the group of institutional investors, increase the supply of financial products through research and development of wealth management products that meet market demands, and provide a larger amount of funding for the real economy and financial markets," said the China Banking and Insurance Regulatory Commission in an announcement posted on its website.

Other banks that obtained regulatory approval for the establishment of wealth management subsidiaries are pushing forward with preparations for opening, the commission said. The regulator also has accepted applications from multiple commercial banks to set up their own wealth management subsidiaries. 

Last year, the commission issued administrative measures for wealth management subsidiaries of commercial banks, setting the threshold requirement for registered capital at 1 billion yuan. 

A number of banks that had announced their plans to establish asset management or wealth management subsidiaries stated that they will consider introducing strategic investors to their wealth management subsidiaries later. 

In the past, banks had limited options for asset management activities. For example, they were not allowed to invest directly in private equity funds or listed securities. According to the new rules, banks can now step into mutual funds and private fund management after receiving necessary licenses for their subsidiaries concerned, said Melody Yang, a partner at international law firm Simmons & Simmons in Beijing. 

By the end of 2018, outstanding non-principal guaranteed wealth management products stood at 22.04 trillion yuan, roughly the same as the end of 2017. The outstanding interbank WMPs declined 62.57 percent year-on-year to 1.22 trillion yuan, demonstrating a significant reduction in idle funds, said a report co-issued by China Banking Association and China's Banking Sector Wealth Management Registration and Trusteeship Center on March 29.