Bank of China, China Construction Bank get wealth management units in shake up of US$4.3 trillion industry
- More than 20 banks have plans to set up such units, according to the China Banking and Insurance Regulatory Commission
- Policy expected to benefit China stock market as well
Beijing has given two of China’s biggest banks the go-ahead to set up wealth management units, a move that could create a new growth engine for an industry struggling to sustain profitability.
The Bank of China and China Construction Bank have received their approvals from the China Banking and Insurance Regulatory Commission (CBIRC), the regulator said in a statement on Thursday. The go-ahead comes three weeks after the commission published the regulations governing these wealth management units.
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“It is a new business for banks, since they need to have high-skilled professionals manage assets, instead of relying on assets to chase profits via interest margins,” said John Qu, a senior partner at global consultancy McKinsey. “In fact, it is a light-asset business, totally different from banks’ traditional lending business.”
Wealth management products issued through banks were valued at 29.54 trillion yuan (US$4.3 trillion) at the end of 2017, according to official data.
More banks are expected to follow with the set up of their own wealth management units. According to local media reports in mainland China, more than 20 banks have plans to set up such units.
On the mainland, banks – except for their private banking units – were barred from directly managing assets for their clients before the rules took effect.