Core Viewpoint - The recent draft of the "Regulations on the Management of Securities Investment Fund Custody Business" marks the beginning of a "capability competition" era in the custody industry, raising application thresholds, improving exit mechanisms, and solidifying custodian responsibilities [1][6]. Group 1: Increased Application Thresholds - The net asset threshold for commercial banks applying for fund custody qualifications has been raised from 20 billion RMB to 50 billion RMB, while for securities companies and other financial institutions, it has increased from 20 billion RMB to 30 billion RMB [3]. - As of the end of 2021, only 22 securities firms had net assets exceeding 30 billion RMB, indicating that the new requirements will likely eliminate many small institutions and increase industry concentration [3][6]. - A new regulatory rating requirement mandates that applicants must have a continuous rating of 2 or above for three years, which will disqualify a significant portion of firms [4]. Group 2: Enhanced Exit Mechanisms - The draft introduces clearer criteria for canceling custody qualifications, allowing for disqualification if a firm has not conducted substantial custody business for two years and has an average fund custody asset scale below 5 billion RMB [11]. - This change aims to eliminate "license hoarding" institutions and push resources towards leading firms, emphasizing the need for existing institutions to rectify their operations within a three-year transition period [12]. Group 3: Strengthened Custodian Responsibilities - The draft emphasizes the need for custodians to securely manage fund assets and introduces independent third-party data verification requirements [15]. - New rules prevent custodians from lowering standards to meet fund managers' demands and require them to disclose risks associated with assets that cannot be effectively supervised [16]. - Custodians are now required to report significant anomalies to the regulatory body on the same day they are discovered, enhancing accountability [16]. Group 4: Industry Performance Insights - Recent reports from major securities firms indicate a focus on expanding custody services, with CITIC Securities reporting a total of 13,890 asset custody products and a steady increase in service quality [18]. - China International Capital Corporation noted a total asset custody and operation service scale of 968.384 billion RMB, reflecting a year-on-year growth of 15.04% [18]. -招商证券 reported a market share of 21.72% in private fund custody products, maintaining the industry lead for eleven consecutive years [18].