Compliance
China Lays Out Wealth Industry Rules To Close Bank Regulation Loopholes
As part of its drive to curb inflationary pressures, the Chinese authorities have completed new rules governing the wealth management industry to ensure that regulatory loopholes are not exploited.
As part of its drive to curb inflationary pressures, the Chinese authorities have completed new rules governing the wealth management industry to ensure that regulatory loopholes are not exploited, Reuters reported.
The wealth management sector has been used by banks to attract deposits and circumvent lending controls, alarming the government at a time when inflationary pressures have been a cause for concern.
The new rules will ban banks from using wealth products to attract deposits or from luring customers into buying products that do not match their risk appetites, the report said.
An 80-clause document was released by the China Banking Regulatory Commission at the weekend. Rules take effect from 1 January next year, the report said.
This publication was unable to establish the details of the report from the CBRC’s own website or contact the organisation at the time of going to press.
In China, the government tells banks how much to lend and at what price via loan quotas and deposit limits.
The wealth management industry in the country has expanded rapidly, matching the fast growth of the world’s second largest economy and the emergence of a new middle class.
The report said the regulator laid out regulations including the following: Banks cannot use wealth products to attract deposits or bundle products in other promotions; banks cannot lure deposits by raising interest rates in "disguised" forms; promotions cannot be aired on television; adverts they must be fair and open, and explain potential risks in simple language to protect interests of customers who cannot be misled; banks cannot promise investment returns or vow to undertake losses when selling products; customers must be informed of any changes in investment strategies that may swing returns and clients have the right to redeem investments if they do not accept proposed investment changes.