BEIJING Dec 3 China's Huaxia Bank Co Ltd
has blamed an employee at a Shanghai branch for
selling a wealth management product without permission, after
Chinese media said the product could not repay investors.
The deposit products, issued by the Zhongding Wealth
Investment Center, were sold by an employee at Huaxia's Jiading
branch, in a Shanghai suburb, Huaxia said in a statement late on
Huaxia did not say what position was held by the employee,
who has left the bank, nor did it say whether the employee had
been dismissed or had left voluntarily.
The bank also did not say how much money might be involved.
It said only that it was "aware" of reports that the investments
could not be repaid when the product matured, but Huaxia did not
confirm those reports.
In a separate statement on Monday, Huaxia said the products
the employee sold were four Zhongding-issued instruments,
available since 2011, which were backed by returns from a pawn
shop and a car sales company in the poor but populous inland
province of Henan.
Chinese banks offer proprietary and third-party wealth
management products that offer higher investment returns than
regular savings accounts to attract and retain wealthy
Typically, each bank generally sells a number of financial
instruments it has approved. In most cases, the small print
reminds investors that the bank does not guarantee performance.
Investment products packaged by private equity firms, like
the one issued by Zhongding, are not routinely offered by bank
Critics worry that the wealth management products are poorly
regulated and might potentially conceal overlapping obligations
that the distributing banks would be required to honour if an
economic slowdown led to widespread default.
Huaxia, which distributes other third-party wealth
management products, said those products are operating normally
and are up to date in their payments.
It said police are investigating.
Huaxia Bank was one the top five most active Chinese banks
in issuing wealth management products in the first half of 2012,
according to a July report by CN Benefit, a wealth management
consultancy based in the city of Chengdu.
(Reporting By Zhao Hongmei, Lucy Hornby and Aileen Wang;
Editing by Daniel Magnowski)