China limits banks’ wealth management business -paper

China’s banking regulator has begun restricting lenders’ wealth management business, banning products that it says involve excessively high risk, the Shanghai Securities News reported on Tuesday, citing unidentified government officials.

China limits banks' wealth management business -paper

Chinese banks have been rushing to sell wealth management products that promise annual returns of up to 8 percent — more than double the one-year bank deposit rate of 3.25 percent — in a bid to attract deposits to support lending amid Beijing’s monetary tightening.

The China Banking Regulatory Commission (CBRC) has ordered banks to stop selling six types of wealth management products that it deems potentially risky, the newspaper said.

The products are characterized by high yields, a mismatch between assets and liabilities and vague descriptions of investment targets, the article said.

They include liquidity pools that involve trust loans, trust transfers, bills of regulatory arbitrage, high-yield deposits, and banks’ purchases of each others’ wealth management products.

Last month, CSRC published draft rules regulating the sale of wealth management products to protect investors by warding off potential risks.

Reuters

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