WMP rules to be tightened further

New regulations seek to enhance protection of investor rights

Regulatory oversight of wealth management products will be tightened to better protect the interests of investors and their legal rights, the China Banking and Insurance Regulatory Commission said.

The regulator said in an announcement on Friday that it is soliciting public opinion on a draft regulation covering commercial banks' wealth management business.

The transitional period was set from the day of promulgation of the regulation to Dec 31, 2020. During the transition period, new products issued by banks also need to meet the new requirements.

According to the commission, the regulatory requirements for public WMPs will be more prudent than those for private products in terms of the scope of investment, leverage ratios, liquidity management and information disclosure. The investment threshold for a single public WMP will be lowered from 50,000 yuan ($7,367) to 10,000 yuan, it said.

Commercial banks are required to transition from capital protected products toward net-worth products, which are similar to open-end funds. The aim is to ensure investors make investments at their own risk based on their solid understanding of that risk.

WMPs can be invested in non-standard credit assets once they meet certain requirements. For example, the balance of a bank's WMPs invested in non-standard credit assets should not exceed 35 percent of the net assets of the bank's WMPs, or 4 percent of its total assets, according to the regulator.

The A-share market's three major stock indexes surged on Friday afternoon, with the Shanghai Stock Exchange Composite Index rising more than 2 percent, led by a rally of shares in banks and non-bank financial institutions.

As of the end of 2017, the balance of banks' WMPs stood at 29.54 trillion yuan, increasing slightly from the 29.05 trillion yuan reported a year earlier, according to the regulator.