Chinese lenders are launching wealth subsidiaries after regulators tightened controls on the sort of guarantees offered on certain products.

ABC Wealth Management Co, a subsidiary of Agricultural Bank of China, has officially opened for business in Beijing, launching a series of new products, media reports said. 

Commercial lenders in China are establishing their own wealth management subsidiaries in response to the banking regulator's call to end implicit guarantees for principal and interest payments on wealth management products, according to China Daily. As also reported here, regulators are trying to force banks to stop providing investors with implicit guarantees against investment losses. They also want banks to strengthen their liquidity management and undertake stress tests to control risk. Banks cannot use WMPs to invest in any bank WMPs or provide a “channel service” for other institutions to bypass regulations.

“ABC WM will specialise in the issuance of publicly-offered wealth management products and privately-offered wealth management products, wealth management advisory and consultancy services, and other relevant wealth management businesses,” the bank said in a recent statement.

“In recent years, the bank has adhered to the general principle of seeking progress while working to keep performance stable, continued its implementation of the guidance related to the `Six Dimension Strategies’ for governing and developing the bank and sped up building itself into a world-class commercial banking group,” it continued. 

“Since last year, the establishment of ABC WM had been one of key reform tasks. Aiming to develop ABC WM with `controllable risks, sustainable businesses and effective services for the group of the bank’, the bank accelerated its transformation toward a corporation engaging in asset management business based on the previous direct operations processes reform of the head office,” it added.