UPDATE 1-China sets sweeping new rules to regulate asset management products

* Central bank issues joint statement with regulators

* This is a 'turning point' for regulators - analyst

* End-2016 volume of asset management business topped $15 trillion (Adds context, analyst comments)

BEIJING, Nov 17 (Reuters) - China's central bank on Friday issued sweeping guidelines to tighten rules on asset management business, the latest step by Beijing to fend off systemic risks in the country's growing shadow banking sector.

The new guidelines unified rules covering asset management products issued by banks, trust firms, insurance asset management companies, securities firms, funds and futures companies, the People's Bank of China (PBOC) said in a joint statement with the banking, insurance, securities and foreign exchange regulators.

At the end of 2016, the collective outstanding volume of their asset management business was 102 trillion yuan ($15.38 trillion), according to the PBOC.

Financial institutions are not allowed to use asset management products to invest in commercial banks' credit assets or provide "channel service" for other institutions to bypass regulations, according to the statement.

Also, financial institutions are required to provision 10 percent of their management fee income from asset management products as risk reserves.

The draft guidelines are the latest and most comprehensive set of rules proposed by the country's financial regulators to fend off shadow banking risks that could spread across different asset classes.

PBOC Governor Zhou Xiaochuan has warned that China's financial system is becoming increasing vulnerable due to high leverage and accumulating "hidden, complex, sudden, contagious and hazardous" latent risks.

Zhou Hao, a Singapore-based analyst at Commerzbank, said "clearly, this is a critical turning point of the financial regulations. Over the past few years, while the financial risks are rising, the overall regulations were actually behind the curve."

He said there are now two changes: "First, the PBOC will play a key role in the new regulatory framework; Second, China is on the track to improve its firewall, to prepare for the new opening up."

Earlier this year, China set up a top-level committee under the State Council to safeguard financial stability, with the central bank playing a leading role.

China announced last week it would lift foreign ownership restrictions on local banks and asset management companies.

In the new guidelines, the central bank said financial institutions are forbidden from conducting capital pools to manage funds raised through asset management products.

Financial institutions would also be punished for providing implicit guarantees for asset management products, the central bank said.

Non-financial institutions are prohibited from issuing or selling asset management products.

The central bank said it would control leverage levels for asset management products to curb asset price bubbles. Highly-indebted companies are not allowed to invest in such products.

The transition period for the new regulations will be until June 30, 2019, the statement said.

($1 = 6.6323 Chinese yuan) (Reporting by Shu Zhang and Ryan Woo; Editing by Richard Borsuk)