Assets held in custody by China's banking sector reached 103.5 trillion yuan ($16 trillion) at the end of June, increasing 53.6 percent from the previous year, the China Banking Association said.

The rapid growth shows that commercial banks are accelerating the development of asset custody as a major contributor to their intermediary income during their business transformation. They are also seeing a rapid growth of China's asset management market.

At present, asset custody covers 11 types of assets, including banks' wealth management products, equity investment funds and pensions, said a recent report by the association.

Five types of assets under custody exceeded 10 trillion yuan at the end of the fourth quarter of 2015. Banks' wealth management assets under custody ranked top with a total amount of 21.54 trillion yuan, followed by 12.07 trillion yuan of securities companies' clients assets under custody.

The ratio of assets under custody to the total assets of the banking industry increased to 45.17 percent in 2015, compared with 31.4 percent in 2014, the report said.

"Commercial banks are making a transition from over-relying on deposits and loans to providing comprehensive financial services. In the current economic situation, banks are not only the credit intermediary connecting investment and financing, but also resource integrators, risk matchers and wealth managers," said Huang Runzhong, head of the secretariat of the China Banking Association.

"As one of the banking intermediary businesses, asset custody could become a platform for effective communication and cooperation between banks and subsidiary financial sectors, offering various resources to the clients.

"It will also bring stable intermediary business incomes. So commercial banks should coordinate different business sections including asset management, investment banking and asset custody, thus joining forces to raise the comprehensive benefit," he continued.

Statistics from the report showed that the incomes from asset custody of the Chinese banking sector rose 21.14 percent from the previous year to 44.89 billion yuan in 2015.

China's asset management industry is facing an unprecedented opportunity for development. The market hit 93 trillion yuan at the end of 2015, with a compound annual growth rate of 51 percent during the last three years. It is expected to further increase to 174 trillion yuan by 2020, said a report jointly released by China Everbright Bank Co Ltd and The Boston Consulting Group in April.

David He, a BCG partner and managing director, said the noticeable increase is driven by multiple factors, such as the reallocation of Chinese residents' wealth from housing to financial assets, the growing demand for investment in pensions and endowment insurance prompted by an aging population, and the need for commercial banks to build more effective allocation mechanisms for credit assets while developing more diversified business models.

As a necessary measure for risk control during financial reforms and innovation, asset custody will help maintain capital safety and social stability, said Huang of the China Banking Association.