The mainland's banking regulator has called on lenders to tighten checks on third-party products sold through their branches in a bid to step up regulation of the shadow banking sector.
The China Bank Regulatory Commission (CBRC) has issued an urgent internal circular requiring banks to check third-party products, mainly insurance, trust products and investment funds, distributed via their branches, Guangdong-based official newspaper Southern Metropolis Daily reported yesterday, citing unnamed sources.
Trust firms previously raised funds from individual investors through selling trust products and investing the funds in real estate or private equity to achieve high returns. Trust products are packaged with the fund and attract investors with a yield that is usually higher than deposit rates.
The circular, issued last Friday, requires banks to check the details of the products they are selling within 15 days, the report said. Banks are one of the channels used by trust, insurance and fund management companies to distribute their products.
Banks should supervise their branches and carry out self-assessment to check if any problems occur during the sales and approval processes, the paper said. The branches were required to report to their headquarters and take effective measures if any violations or major risks were found, it added.
The CBRC's measure aims to restore investors' confidence after an incident involving a product sold though Huaxia Bank, said Chen Xingyu, an analyst with Phillip Securities in Shanghai. Earlier this month, panicked investors rushed to the bank following reports that a wealth management product - offering an annual interest rate of 11 per cent - had stopped making payments. The bank blamed a rogue employee.