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UPDATE 1-China caps insurers' investments in their shareholders

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BEIJING, Sept 9 (Reuters) - China's banking and insurance regulator put a cap on Monday on how much insurance firms can invest in their shareholders, aiming to curb risks linked to the misuse of financial resources.

China is sharpening its scrutiny of insurers' and small banks' shareholders amid fears that loans and investment given to big investors could prove a weak point in the country's financial system.

Under the revised rules, which took effect on Monday, an insurance company's combined investments in companies that are its shareholders or their related parties must not exceed 30% of the insurer's previous year's total assets or net assets, the China Banking and Insurance Regulatory Commission (CBIRC) said in a statement on its website.

An insurer's investment in any single shareholder is capped at 15% of the insurance firm's total assets, the regulator said, under the new rules which aim to improve corporate governance in the sector.

The board of each insurer will also have to set up a committee to control and assess the risks of related transactions routinely, according to the revised regulations. (Reporting by Cheng Leng, Vincent Lee and Beijing Monitoring Desk Editing by Edmund Blair and Susan Fenton)