China’s banking regulator imposed multimillion-yuan fines on two banks for violating rules on wealth management products, the first such penalty since they came into effect in January.
The fines were imposed on Bank of China and China Everbright Bank and their wealth management units, both of which were established by their parent companies in 2019.
The rules seek to stamp out shadow banking risks by imposing stringent requirements such as leverage limits and banning malpractices like providing investors with an implicit guarantee against losses.
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Bank of China and its wholly-owned wealth management unit were fined 6.6 million yuan (US$991,000), while China Everbright Bank and its wealth unit were penalized 8.3 million yuan, according to the China Banking and Insurance Regulatory Commission (CBIRC) on Friday.
China Everbright Bank and its wealth unit were penalized 8.3 million yuan by the mainland’s banking regulator. Photo: AFP alt=China Everbright Bank and its wealth unit were penalized 8.3 million yuan by the mainland’s banking regulator. Photo: AFP>
“Leading state-owned banks have rarely been subjected to such penalties as they generally have more stringent internal risk management than other commercial banks,” said Chen Shujin, an analyst at Jefferies. “The fines underscore how banks are still adjusting their businesses to fully comply with the new rules.”
Since details of the new rules was announced in August 2018, banks had until the end of 2021 to align themselves with the new requirements. To adhere to the changes, Chinese banks have set up dedicated wealth management subsidiaries.
The CBIRC said on Friday that the two banks and their subsidiaries had products that flouted regulatory requirements. This included exceeding a 30 percent market cap on single security held by all wealth products marketed by a bank and crossing a leverage limit that caps total assets to net assets at 140 percent for open-end mutual funds.