The China Banking and Insurance Regulatory Commission (CBIRC) announced last Friday that it penalized the two banks and their wealth management unit in late May, the first time since onshore banks were allowed to set up subsidiaries. to manage their wealth management products business in 2019.
The banking regulator imposed fines totaling RMB 14.9 million ($2.2 million) on Bank of China and China Everbright Bank and their wealth management subsidiaries, both established in 2019.
Bank of China Wealth Management was charged RMB 4.6 million for six violations, including exceeding the security asset allocation cap, exceeding the debt level of an open public fund, carrying out of unfair transactions under the same contract and the use of the amortized cost method for the valuation of the investment. assets.
The watchdog also fined Bank of China RMB 2 million for “increasing the size of some of its old products.”
Everbright Wealth Management was fined RMB 4.3 million for five offences, of which the market value of a single security held by a financial product offered to the public exceeds 10% of the net assets of the product, the value market value of a single security held by all public offering financial products exceeds 30% of the market value of the security, the proportion of high-liquidity assets held by financial products making public offerings does not meet the standard.
Its parent company, China Everbright Bank, was also charged RMB 4 million for failing to uncover its subsidiary’s misconduct as trustee of the wealth management unit.
In an attempt to counter systemic financial risks, in 2018 the authorities issued “guidance opinions on the regulation of the asset management activity of financial institutions”.
The rules impose strict requirements on leverage limits, fund pool regulation and prohibition of abusive practices such as providing investors with an implied guarantee against loss.
Since 2019, 29 wealth management companies have been approved to set up in China, 25 of which have been allowed to open, according to the CBIRC.
The total balance of wealth management products of banks and wealth management companies stood at RMB 28.4 billion at the end of March, and the balance of wealth management company products reached 17 .3 billion RMB.
In order to ensure compliance with laws and regulations, the authorities are now seeking the public’s opinion on the “internal control rules for asset management companies”.