中国收紧银行理财产品

China's banking regulator has released a second draft of rules to tighten regulations on commercial banks' wealth-management products. The regulation is aiming to controling risks in the country's banking system amid rising bad loans. But when the draft was released last week, it created immediate liquidity worries in the stock market. CCTV Mi Jiayi reports.

According to the draft regulations, banks that fall below particular capital requirements could be banned from providing retail investors with wealth management products putting money directly or indirectly into equity investments, which for the most part is to say the stock market.

The ban could also affect so-called non-standard assets, which include credit loans, trust loans, acceptance bills, and letters of credit. Both investment channels have higher yields, but they also have higher risks than other instruments.

It's a huge market -- in 2015, wealth management products issued by banks hit 23.5 trillion yuan, a 56 percent increase from a year earlier. The assets affected by the new draft accounted for 24 percent of that.

Shao Yu, chief economist of Orient Securities, said, "From my understanding, the new draft aims to lower individual investment in high-risk financial products via bank channels. So once equity and non-standard assets investment were banned, these funds would seek new channels. However overall liquidity will not shrink all of a sudden. The next-best possible option could be trust-related investments."

The new rules would not affect retail investors who put money in the care of investment brokers -- the rules affect only investments offered by banks. For those bank investments, however, the bond market would also be a safer haven. The options all mean that future wealth-management products issued by banks would have lower returns than they do now.

According to third-party banking monitor PY Standard, the average yield of banks' wealth-management products has been falling already, from 5.5 percent from the beginning of last year to 3.9 percent now due to a weakened RMB.

Sang Liuyu, chief analyst of Vstone financial products research center, said, "Lower returns are inevitable. Once the investment focus shifts to the bond market, the yield will continue to drop. We can compare the current yield in the bond market - the five year national bond yield is 3.1 percent, and five-year triple-A corporate bonds are yielding 3.2 percent. These are still lower than the banks' average yield rate - 3.9 percent. And most of the wealth-management products expire in one year, so the returns would be even lower than the five-year rates. So returns of new products could go below three percent."

Analysts do point out, however, that even if implemented, the impact of the rules would not be immediate. They would apply only to newly issued wealth-management products, while existing ones would not be affected.