Source: CCTV.com

03-27-2008 09:10

The banking regulator says it will look into whether lenders have been scrupulous in their promotion of wealth management products. This follows complaints from the public that many banks overstated potential returns and played down the risk factor for products that are now showing zero, or negative, returns.

Many banks overstated potential returns and played down the risk factor for products that are now showing zero, or negative, returns. 
Many banks overstated potential returns and 
played down the risk factor for products that
are now showing zero, or negative, returns. 

The Chinese Banking Regulatory Commission has issued more than 90 regulations and rules on banks' wealth management products. The investigation will focus on product design, promotion, transparency and account management services. Most importantly, it will review whether and how well banks match a customer's risk appetite with a product that fits their needs.

Yin Long, CBRC Official said "For example, we divide a customer's ability to withstand risk into five levels. Product risk is also divided into five levels. If you sell your highest risk product to a low-risk customer, it's not in line with our rules."

Although CBRC regulations require risk assessments, rarely do banks perform them before recommending and selling their products. Brochures introducing wealth management products seldom mention investment risks, focusing instead on the possibility of high returns.

The CBRC official says banks need to be more responsible and that they could face serious punishment if they do not perform customer risk assessments and mention the potential investment risks.

Yin Long said "We have three levels of punishment. First, we will punish the banks. Second, we will suggest that managers in the financial management department step down. And third, we may revoke the certification of the sales staff."

There are thousands of wealth management products in the market, with a total volume of 800 billion yuan. The CBRC suggests investors be aware of the potential risks... and to sue banks if they are found not to have protected their interests.

 

Editor:Xiong Qu