China's
Huaxia Bank has blamed an employee at a Shanghai
branch for selling a wealth management product without permission, after
Chinese media said the product could not repay investors, according to Reuters.

The deposit products, issued by the Zhongding
Wealth Investment
Center, were sold by an employee at
Huaxia's Jiading branch, in a Shanghai
suburb, Huaxia Bank is reported to have said. The firm did say what position was
held by the employee, who has left the bank, nor did it say whether the
employee had been dismissed or had left voluntarily.

Huaxia said in a separate statement yesterday that the
products the employee sold were four Zhongding-issued instruments, available
since 2011, which were backed by returns from a pawn shop and a car sales
company in the poor but populous inland province of Henan.

Chinese banks offer proprietary and third-party wealth
management products that offer higher investment returns than regular savings
accounts to attract and retain wealthy depositors. Typically, each bank
generally sells a number of financial instruments it has approved. In most
cases, the small print reminds investors that the bank does not guarantee
performance.

There are concerns that the wealth management products are
poorly regulated and they might potentially conceal overlapping obligations
that the distributing banks would be required to honour in the event of a sharp
economic contraction.