Smaller Chinese Banks Ordered to Hold off on Wealth Management Expansion

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Smaller regional banks in China have reportedly received instructions from regulatory authorities to scale back their wealth management ambitions unless they have their own specialised licensed subsidiary.

Multiple regional authorities issued directives to small-and-medium sized banks within their jurisdictions, telling them to refrain from increasing the scale of their wealth management operations this year, according to a report from National Business Daily.

A source from a municipal lender say the directive specifically targets wealth management operations conducted by banks themselves, instead of via a licensed wealth management subsidiary.

“Regulators were only referring to controlling the scale and pace of growth of operations – there’s no problem with rational growth,” said the source.

“I expect that the [Notice] is directed at banks that have not obtained a license for their own wealth management subsidiary.”

Wealth management products issued by specialist wealth management subsidiaries accounted for nearly 60% of market share as of the end of 2021, according to the “China Banking Sector Wealth Management Market Annual Report (2021)” (中国银行业理财市场年度报告(2021年)) released by the China Banking Wealth Management Registration System (银行业理财登记托管中心).

As of the end of 2021 the bank wealth management market stood at 29 trillion yuan, for year-on-year (YoY) growth of 12.14%.

A total of around 47,600 new wealth management products were issued that year, raising 122.19 trillion yuan in funds, and creating returns of nearly 1 trillion yuan for investors.