The threshold for applying the equity method may be raised, making it difficult for banks to obtain bargain purchase gains from stocks.

Recently, the Ministry of Finance drafted the "Interpretation of Accounting Standards for Business Enterprises No. 22" and solicited opinions from relevant units. The exposure draft further refines the applicable conditions for the equity method of long-term equity investments and the presentation of bargain purchase gains under the equity method, and proposes criteria for determining significant influence when the voting rights ratio is below 20%. An investor must simultaneously meet four conditions before it can use the equity method of accounting. In the current market environment where A-share bank stocks are broadly trading below book value, bargain purchase gains can bring investors considerable non-operating income. If the relevant rules are ultimately implemented, although the underlying logic for insurers and AMCs allocating to bank stocks will not change, the threshold for equity method accounting will be raised, and the difficulty of obtaining bargain purchase gains will increase.