China warns banks anew on WMPs

Orders banks to strengthen checks on underlying assets of Wealth Management Products.

The China Banking Regulatory Commission said commercial banks must set up an accounting book for each finance product to guarantee its investment channel can be clearly tracked and monitored.

CBRC singled out investment risks in informal debt assets such as trust loans, letters of credit, accounts receivable and bank acceptance bills that are classified as WMPs in China.

It said banks must inform investors of any change in underlying assets within five days. It also requires banks to keep investments in such assets at no higher than 35% of total outstanding wealth management products, or no more than 4% of their total assets, whichever is the lower amount.

Banks are ordered to fully disclose all information related to wealth management products, including the borrower, return ratio, maturity and transaction structure.

It is China's latest move to regulate the booming sales of finance products through banks that are boosting concerns about default risks due to poor information disclosure and opaque investment structures.