As the deadline approaches, a wave of subscription suspensions for money market funds, involving dozens of small and medium-sized banks and several leading fund companies, is quietly unfolding.
Recently, multiple small and medium-sized banks, including Changshu Rural Commercial Bank, Longjiang Bank, and Tianjin Rural Commercial Bank, have issued announcements suspending all or part of the subscription and fixed investment services for money market funds.
Fund companies such as E Fund, China Merchants Fund, ICBC Credit Suisse, Lion Fund, and China Europe Fund have also frequently released announcements, suspending subscription and fixed investment services for some of their money market funds through certain bank channels. Redemption and conversion services remain unaffected.
According to incomplete statistics, since mid-to-late May, over 30 banks and around 10 fund companies have announced the suspension of subscriptions for some money market funds.
Behind this collective suspension is the impending deadline for a regulatory new rule issued by authorities in November 2025, which sets requirements for fund settlement timelines.
Behind "System Upgrades": T+1 Settlement Rule to Take Effect Soon
The suspension announcements from fund companies include a broader list of banks. For example, E Fund’s announcement regarding the suspension of subscription and fixed investment services for some of its money market funds through certain sales institutions mentioned that, starting May 25, 2026, these services would be suspended at 31 small and medium-sized banks, including Bank of Changsha, Bank of Dalian, Guangdong Huaxing Bank, Bank of Jiangxi, and Bank of Jinhua.
Penghua Fund’s list of sales institutions suspending subscriptions for some of its money market funds includes 12 banks, such as China Everbright Bank, China Zheshang Bank, Bank of Guangzhou, and Xiamen Bank. Besides city and rural commercial banks, this list also includes two joint-stock banks.
Some banks have provided reasons for the suspension. Changshu Rural Commercial Bank mentioned, "To meet the requirements for upgrading the fund’s intraday clearing function, we will conduct a specialized upgrade of our money market fund business system." As a result, the bank suspended subscription services for all money market fund products it sells.
Longjiang Bank stated that it is "optimizing system parameters for money market funds in accordance with regulatory requirements." During this optimization period, subscription-related services for money market funds, including fixed investments and conversion transfers, have been suspended.
Tianjin Rural Commercial Bank also noted that this business adjustment is based on regulatory requirements for the settlement mechanism of public fund sales.
"Regulations require that subscription funds for money market funds must be settled by T+1. Some institutions that do not meet this requirement have had to suspend subscriptions temporarily," a source from the internet finance department of a fund company explained.
The origin of these changes can be traced back to a regulatory circular issued by authorities on November 24, 2025.
The circular clearly sets a red line: For over-the-counter money market funds, fund sales institutions must transfer successfully confirmed subscription funds, after deducting relevant fees, to the fund’s registration account by 4:00 PM on the day following confirmation.
The circular required fund companies and sales institutions to make adjustments and improvements within six months, and the deadline for completing these adjustments has now arrived.
Targeting "Enhanced Money Market" Products
The core of this regulatory tightening is to close the loophole for "enhanced money market" products, which have become increasingly popular in recent years. "The main goal is to restrict enhanced money market products," a source from a fund sales company noted.
"Enhanced money market" refers to products that offer additional returns subsidized by partner institutions on top of the base returns of money market funds, resulting in significantly higher yields compared to ordinary money market funds. The mechanism is not complicated: it leverages the interest earned from funds deposited in the accounts of sales institutions for several days.
The specific process involves a bank’s wealth management subsidiary subscribing to a money market fund on a Thursday, with the funds entering the custody account of the sales institution, typically a small or medium-sized bank in need of deposits. The funds are transferred to the fund account on T+2, but due to weekends or holidays, they may remain idle in the account for up to four days, generating demand deposit interest. Some sales institutions then use part of this interest to subsidize the wealth management subsidiary, achieving "enhanced" returns higher than those of ordinary money market funds.
The new T+1 settlement rule requires subscription funds to be transferred to the fund’s account on the day of confirmation. For example, if a subscription is made on Thursday, the funds must enter the fund account by Friday, completely eliminating the idle time in the sales institution’s account and removing the opportunity for interest subsidies.
Previously, when investors purchased money market funds through sales channels on T day, the funds would first enter the custody account of the sales institution and only reach the fund account on T+2, with delays for weekends or holidays. The new rule requires subscription funds to be transferred from the sales institution to the fund account by 4:00 PM on T+1, imposing far higher timeliness and precision requirements on the fund settlement systems of sales institutions and fund managers.
It has been noted that many city commercial banks, rural commercial banks, and other small and medium-sized banks appear on the suspension list. A representative from one such bank on the list mentioned that the bank sells a relatively small number of funds. It is understood that sales institutions suspending services may be primarily related to limited investment in financial technology or insufficiently developed technical systems.
As for when subscriptions will resume, most banks or fund companies have stated that further announcements will be made, though some have already provided timelines.
For example, Lion Fund announced that some banks would suspend subscription services for certain Lion money market funds starting May 22. It also mentioned that Qishang Bank and Weihai Bank would resume subscription and fixed investment services for individual investors starting May 27. This indicates that some institutions can complete system upgrades to comply with the new settlement rules within a few days.
In the long run, closing this loophole will promote fair competition among various money market asset management products on a level playing field, which is beneficial for protecting the interests of fund holders.
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