BANKS should fully evaluate investors' risk tolerance, China's banking supervisor reiterated yesterday, after an investment fund was liquidated.
The China Banking Regulatory Commission said that it would require risk warnings to be highlighted in manuals and agreements for investment products.
The statement followed China Mingsheng Banking Corp's liquidation of a qualified domestic institutional investor fund, which raised concern about a wider failure of QDII products. They were set up to allow Chinese investors to invest in overseas capital markets.
Minsheng sold 100 million shares in its QDII product at one yuan (14 US cents) apiece last October. The product was attached to a Hong Kong-based Baring fund, which plunged amid the global credit crisis.
On March 19, Minsheng said that it would liquidate the fund and repay investors, as required if the fund's assets fell below 50 percent of their initial value.
CBRC said that banks should be more scrupulous about dealing with clients, notably the elderly and those with lower incomes.
Sources with the commission said that it was developing detailed rules to standardize financial product sales, noting that banks that failed to consider risk tolerance would face penalties.
Chinese commercial banks have offered 1,302 yuan-dominated products and 1,760 foreign currency-dominated products, said the China Academy of Social Sciences.