China orders small banks to curtail wealth management business, sources say

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BEIJING, June 20 (Reuters) – China’s banking regulator has given small banks a 2026 deadline to stop selling wealth management products unless they have a separate wealth subsidiary in a bid to curb financial risks, three people with knowledge of the matter told Reuters.

A 2018 regulation and previous instructions had required banks to set up a wealth management subsidiary dedicated to such products, but the regulator did not give a timeline for when banks had to comply.

In addition to stipulating a deadline, the latest instruction also requires some small banks to reduce their wealth management business activities by the end of this year, the sources added.

Small regional lenders in Shandong, Guangdong and Zhejiang provinces are among banks that have been instructed to reduce their wealth management business by the National Financial Regulatory Administration (NFRA), the sources said.

The sources declined to be named as the instructions have yet to be made public.

The NFRA did not immediately reply to a Reuters request for comment.

The instruction is the latest effort by the government to rein in risks in the sprawling bank wealth management sector, which has been targeted as part of a regulatory crackdown on shadow banking activities over the past few years.

It would make banks standardise their wealth management businesses and to invest the funds into the capital markets in a compliant way.

They also aim to establish a clear separation between banks’ wealth management operations and their other businesses to eliminate any implicit guarantee that these investment products would be bailed out by the banks if they perform poorly.

Since the 2018 regulation, China’s major state-owned banks and large national commercial lenders established separate wealth management subsidiaries, but most smaller regional banks have lagged behind.

Image by: Pixabay

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Edmund Shing, PhD

Global Chief Investment Officer
BNP Paribas Wealth Management

Edmund has over 29 years of experience in financial markets in a wide variety of positions, ranging from proprietary trading to portfolio manager in a number of financial institutions in London and Paris.  He previously held the role of Global Head of Equity and Derivative Strategy at BNP Paribas in London from 2015 to 2020, and has been Chief Investment Officer at BNP Paribas Wealth Management since November 2020.

Edmund is responsible for piloting our investment strategy and will continues to rollout out recommendations and themes with actionable advice that brings our expertise to our clients and support to our client-facing teams.  In this time of change, his expertise in following and anticipating markets is a true value added for both our customers and those at Wealth Management who serve them.

Edmund has a PhD in Cognitive and Computing Science from the University of Birmingham in the United Kingdom, and has done advanced studies in Knowledge-Based Systems and in Experimental Psychology.  He is an EFFAS-certified financial analyst. He has also authored the book “The Idle Investor” published by Harriman House in 2015, proposing 3 simple investment strategies that take only a few minutes to execute per month.

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