Shanghai’s banking regulator is requiring lenders to open telephone hotlines for customers to report staff attempting to sell unauthorized wealth management products as China cracks down on illegal soliciting.
The Shanghai branch of the China Banking Regulatory Commission and the city’s banking association have also begun taking customer complaints on employee misconduct through their own hotlines, the local regulator said in an e-mailed statement yesterday.
The requirements come after a former employee of Huaxia Bank Co. was suspected of promoting an unauthorized investment product that later failed. Chinese banks have been relying on wealth management products, which offer higher returns than benchmark deposit rates, to keep customers from moving savings to rival banks.
The balance of Chinese lenders’ wealth management products may have jumped to 13 trillion yuan ($2.09 trillion) by the end of 2012 from 8.5 trillion yuan a year earlier, according to Fitch Ratings.
The CBRC last week banned bank employees from selling wealth management products without authorization and told the banks to stop selling private-equity related products or misleading customers into buying such products. The hotlines in Shanghai will also be used for reporting staff that solicit private loans, according to the statement.
Investors of the Zhongding Wealth Investment Center Limited Partnership, the savings product sold by Huaxia Bank’s former employee in Shanghai, had their principal repaid in full after a guarantee firm bought the asset, Securities Times reported on Jan. 22.
— With assistance by Jun Luo