SHANGHAI, Nov 17 (Reuters) - The head of China’s banking regulator has told banks to temporarily halt sales of short-term wealth management products to reduce volatility in market liquidity, a local newspaper reported on Thursday.
Banks often turn to short-term products to collect deposits to meet regulatory requirements at quarter-end.
Chinese Banking Regulatory Commission (CBRC) Chairman Shang Fulin said he was worried about the risks such moves posed to market liquidity and called on banks to suspend sales of products with maturities of less than a month, the 21st Century Business Herald reported, citing sources.
More than just a growth area, China’s wealth industry has been used by banks to attract deposits and skirt lending restrictions to the chagrin of Beijing, which is seeking to control lending to manage inflation.
In early October, the government signed off on a set of rules for the small but booming wealth management sector to temper rapid growth and prevent banks from exploiting loopholes.
The International Monetary Fund warned on Tuesday that China’s biggest commercial banks faced systemic risks if a combination of credit, property, currency and yield curve shocks that could be withstood in isolation were to occur together. (Reporting by Chen Yixin and Kazunori Takada; Editing by Chris Lewis)