Yields on Bank Wealth Management Products Drop to Nine Month Low

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Yields on the wealth management products (WMP’s) of Chinese banks have dropped to a nine month low following the launch of new asset management regulations as well as supplementary rules that seek to undermine “implicit guarantees.”

Data from Rong360 indicates that a total of 2075 WMP’s were launched during the week from 27 July to 2 August, for a decline of 234 products compared to the preceding period.

The average expected annualised return was 4.68%, for a decline of 0.04 percentage points compared to the preceding period.

According to Rong360 Bank WMP’s have posted six consecutive weeks of declining yields, to hit their lowest levels since November last year.

Average yields peaked at 4.93% in February before embarking upon a trajectory of continuous decline, and posting especially sizeable falls over the past two months.

Beijing launched new asset management regulations in April with the goal of undermining the “implicit guarantees” that undergird WMP’s, which are viewed as a key source of moral hazard and attendant systemic risk.

China’s financial authorities also unveiled supplementary regulations in July stipulating that future WMP’s must be based upon net value as opposed to expected returns.

Rong360 data indicates that a total of 137 guaranteed-return WMP’s were issued last week, with an average expected return of 3.87%, while 398 guaranteed-principal floating return WMP’s were released with an average expected return of 4.15% alongside 1411 floating return WMP’s with an average expected return of 4.92%.

A total of 53 structured deposit products were issued for a decline of 27 compared to the preceding week, as Chinese regulators place them under greater scrutiny due to concerns that they are being used by banks as an alternative means of providing implicit guarantees.

Related stories

Regulation of Bank Wealth Management Products Set to Further Intensify 

Structured Deposits of Chinese Banks See First Decline in Six Months 

Banks Use Principal-guarnateed Structured Deposits as Replacements for WMP’s

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