The National Financial Regulatory Administration (NFRA) has unveiled the Provisional Measures for the Supervision and Administration of Local Asset Management Companies to strengthen oversight and promote standardized industry development. These regulations aim to enhance regional financial stability and mitigate systemic risks in the real economy.

Structured across four chapters with 45 articles, the framework establishes three core regulatory pillars:

1. **Business Scope Definition** Local AMCs must primarily engage in NPL disposal within their registered provinces, with cross-regional operations generally prohibited. Permitted activities include bankruptcy management, advisory services, and market-oriented debt-to-equity conversions. Strict prohibitions ban: - Capital protection commitments or fixed-income guarantees - Facilitating false off-balance-sheet transactions for financial institutions - Providing financing channels that increase local government hidden debt - Acquiring assets from government entities or defense-related sectors

2. **Risk Containment Mechanisms** Exposure limits cap single-client financing at 10% of net assets and group-client exposures at 15%. Liquidity requirements mandate holdings of high-quality assets covering net outflows for 30 days. The 3x leverage ceiling on external financing and 50% cap on related-party exposures aim to prevent systemic contagion.

3. **Supervisory Responsibilities** Provincial regulators assume primary oversight duties including: - On-site inspections and off-site monitoring systems - Liquidity risk surveillance - Mandatory reporting for material events like debt defaults - Authority to revoke NPL acquisition eligibility for non-compliant AMCs

The measures take immediate effect with a three-year transition period for compliance. They replace previous rules issued in 2019 (CBRC Notice [2019]153), establishing unified standards for China's 59 licensed local AMCs managing approximately ¥800 billion in distressed assets nationwide.