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Bank wealth management products weather the storm

By Yang Zhen (China Daily)
Updated: 2009-04-23 07:46

Wealth management products offered by banks in China have managed to perform well despite the global economic downturn.

A report by Chinese financial consulting firm Benefit Wealth said 88.13 percent of the 598 wealth management products that matured in March reached their projected returns, while only 10.2 percent fell short of their targets.

Although 24 structured wealth management products from 12 different banks had failed to deliver on their targeted returns, only two actually suffered losses, the report said. Another 16 out of these 24 products produced zero returns.

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"Financial products from banks performed pretty well compared to similar products from other financial institutions. Chinese consumers should still feel safe to let the banks handle their wealth," said Zhang Xing, a researcher from Benefit Wealth.

Qualified domestic institutional investor (QDII) products, which invest in overseas markets, had earlier this year lost more than 50 percent of their combined value, triggering a wave of complaints from investors.

Standard Chartered Bank, a British bank with rich experience in wealth management, was sued by a couple of investors for allegedly failing to provide sufficient warnings of potential risks.

"Most of the foreign banks must be feeling that they didn't do anything wrong as they applied the same disclosure policies as they did in other countries. And it's true that investors have to understand where they're putting their money and take full responsibility for their decisions," said Li Fuan, director of product innovation at the China Banking Regulatory Commission (CBRC).

But Li also pointed out that Chinese consumers' perception of banks is totally different from consumers in other countries. "The difference is most Chinese consumers think banks are supposed to be the safest place for their money. That's why a lot of them can't accept investment losses in products recommended by banks."

Li suggested banks in China should offer wealth management products that can at least avoid losses.

Benefit Wealth researcher Zhang added that the final value of the wealth management products might recover after the market improves.

About 92 percent of existing QDII products from banks saw their value grow in March, according to a report from Benefit Wealth. By the end of March, 337 existing QDII products had an average loss of 39.99 percent, compared with 43.71 percent a month ago.