China tightens wealth management regulation

Urgent internal circular orders banks to check sales of third-party products.

The China Banking Regulatory Commission (CBRC), the banking sector regulator, said the tightening of controls is intended to ward off potential risks. The circular requires banks to check their sales of third-party products made through their branches, mainly insurance, trust products and investment funds.

CBRC is worried about the risk of a crisis of confidence in wealth management products following investor protests at Hua Xia Bank after a product sold through its Jiading branch failed to pay out upon maturity last November. The bank says a branch employee sold the product without authorization.

Banks must complete investigations within 15 days. CBRC will also conduct random checks on bank branches after they hand in self-assessment reports.

CBRC said that if bank branches find rule-breaking behavior and major risks, they must report to their headquarters immediately and work with cooperative institutions to take effective measures to resolve risks and report to bank regulators in time. The sale of banks' own wealth management funds will not be affected by the move, however.