Many banks in China are working to improve their wealth management businesses amid a growing number of complaints from disgruntled customers.
The grumblings have prompted the country's banking watchdog to issue guidelines urging both domestic and foreign banks to take greater care in designing and handling personal wealth management products. The warning came at a time when investment markets at home and abroad are grappling with uncertainty and rising commodity prices.
Consequently, bolder equity-linked products have largely fallen out of favor with customers, while safer products, especially those with principal guarantees, are gaining popularity.
A sales official with Shanghai Pudong Development Bank, who declined to be named, said the bank has learned lessons from criticisms of its low-yield wealth management products.
The bank, in which US financial service giant Citigroup is a stakeholder, is the first institution to announce one of its products earned "zero profit" this year.
"We have started reforming the design and sales processes of our wealth management products," she said.
One measure involves including risk assessments in informational materials about the products.
"The sale process will no longer be a one-off deal," the official said.
Many other banks have trimmed the product introductions on their websites and have said they are studying the new regulations.
"Our bank will devote more energy to researching and analyzing market trends and investors' needs, and we will accordingly establish QDII products," Executive Vice-President of Bank of East Asia (China) Lam Chi Man said.
The Hong Kong-based lender has been another target of fierce criticism after one of its products linked to overseas funds suffered substantial losses.
China's wealth management industry has undergone explosive growth because banks are eager to snap up the fee-based incomes.
Incomplete figures provided by the Chinese Academy of Social Sciences show 953 wealth management products were either on sale or in the pipeline between Jan 1 and March 25.
Many suffered losses because of the global stock market slump, inciting potent condemnations from bank customers and forcing authorities to step in.
China Banking Regulatory Commission earlier this week exposed the flaws of commercial banks' wealth management products. Days before, it had announced stricter controls on the sector. After conducting a sample survey, the commission issued a report that said many banks' products' design and management mechanisms were defective.
(China Daily April 18, 2008)
