Recently, the Financial Industry Asset Management Committee of the Investment Association of China (hereinafter referred to as the "Asset Management Committee of the China Investment Association") released the Research Report on the Wealth Management Business of Small and Medium-sized Banks (hereinafter referred to as the "Report"), pointing out that since 2021, small and medium-sized banks that have not established wealth management companies have successively received "window guidance" from local financial regulatory authorities on controlling the scale of wealth management. Some require the scale to be compressed to a certain point in time; Some require the scale of wealth management to decrease month by month, but the overall direction is: small and medium-sized banks are required to reduce the scale of wealth management business and control the development of wealth management business.
1. Wealth management business of small and medium-sized banks: the pattern is reshaped, and the change is imminent
In fact, since 2018, the regulatory framework of the banking and wealth management industry has been significantly strengthened and improved. A series of strict regulatory measures, especially in key areas such as access conditions, net capital management and product sales, reflect the increasing supervision of the industry.
Specifically, regulatory actions can be divided into three main phases and provisions:
- New Asset Management Regulations: In April 2018, the People's Bank of China, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission (CSRC) and the State Administration of Foreign Exchange (SAFE) jointly issued the Guiding Opinions on Regulating the Asset Management Business of Financial Institutions (hereinafter referred to as the "New Regulations"), Article 13 of which proposes that "financial institutions whose main business does not include asset management business shall establish an asset management subsidiary with independent legal person status to carry out asset management business, strengthen the risk isolation of legal persons, and establish a special asset management business operation department to carry out business if the conditions are not met for the time being." ”
- New Wealth Management Regulations: In September 2018, the China Banking and Insurance Regulatory Commission (CBIRC) formulated the Measures for the Supervision and Administration of Wealth Management Business of Commercial Banks (hereinafter referred to as the "New Wealth Management Regulations"), Article 14 of which once again clarifies that "commercial banks shall carry out wealth management business through subsidiaries with independent legal person status." If the conditions are not met for the time being, the head office of a commercial bank shall set up a department specializing in wealth management business to carry out centralized and unified operation and management of wealth management business. ”
- Measures for the Administration of Wealth Management Subsidiaries of Commercial Banks: In December 2018, the China Banking and Insurance Regulatory Commission (CBIRC) formulated the Measures for the Administration of Wealth Management Subsidiaries of Commercial Banks, which defined wealth management subsidiaries as "non-bank financial institutions established by commercial banks within the territory of the People's Republic of China with the approval of the banking regulatory authority of the State Council mainly engaged in wealth management business", and stipulated the organizational form, shareholders, business scope, sales management, investment scope, risk management and other aspects of wealth management companies.
In addition to the relevant policy background, the "window guidance" and the external market environment have also brought certain challenges to the development of the wealth management business of small and medium-sized banks:
First, in terms of satisfying customers' financial needs, with the increasing and diversified financial needs of customers, customers tend to choose those large banks or institutions that can provide richer and more professional financial services, resulting in the gradual decline of the competitiveness of small and medium-sized banks in the region.
Second, in terms of improving financial management capabilities, wealth management business requires in-depth investment research, risk management and market insight capabilities, which require long-term accumulation and practice. However, due to their small scale and limited resources, it is often difficult for small and medium-sized banks to make breakthroughs in the field of wealth management, and thus cannot fully prepare for the application for the establishment of wealth management companies.
Third, in terms of the control of wealth management scale, in order to meet the requirements of the regulatory authorities for the control of wealth management scale, small and medium-sized banks need to adjust their investment strategies and business models, which means that small and medium-sized banks have to liquidate some assets, or cause some products to turn into real losses, and the products are facing net value pressure.
Fourth, in terms of revenue and assets, because wealth management business is one of the important sources of income for small and medium-sized banks, the regulatory control of wealth management scale will have a certain impact on their intermediate business income. At the same time, due to the inability to meet customer needs and clear assets, small and medium-sized banks will also face greater reinvestment risks on the asset side. The combined effect of multiple factors may lead to an imbalance in the asset and liability structure of small and medium-sized banks.
2. Issuance: The market share of small and medium-sized banks continued to decline
(1) Issuer market participants fell sharply
As of June 24, 2024, the number of participating institutions in the wealth management issuance market has shrunk to 276, of which the number of urban commercial banks has dropped from 120 in the second half of 2018 to 104. The number of rural financial institutions involved fell by more than 60%, from 337 in the second half of 2018 to 114.
(2) The proportion of net-worth wealth management products of small and medium-sized banks has decreased
As of the end of May 2024, a total of 252 banking institutions and 31 wealth management companies across the country have existing wealth management products, with a total of 40,099 existing products. The scale of existing products is about 28.81 trillion yuan. In terms of the types of institutions, the market share of urban commercial banks and rural financial institutions gradually shrank, and the number of existing products of urban commercial banks decreased by 3.68% year-on-year to 9,003. The number of existing products of rural financial institutions decreased by 16.58% year-on-year to 6,881, and its scale decreased by 2.37 percentage points year-on-year.
3. Consignment side: It has become a trend for small and medium-sized banks to switch to the consignment track, and their business competitiveness needs to be improved
In terms of the current bank wealth management market, whether from the perspective of regulatory policy guidance or wealth management business development needs, wealth management companies will undoubtedly become the main force in the supply of wealth management products, and commercial banks will gradually transform into the role of consignment sales of wealth management products. For most small and medium-sized banks that have not yet established wealth management companies, consignment sales may become a new way of business growth.
(1) There is a significant trend of small and medium-sized banks participating in consignment sales
From the distribution of the number of types of wealth management agencies in May 2024, the total number of agency agencies in May 2024 is 650, of which the number of rural financial institutions is the largest, with 522, accounting for 80.31%. With the stricter requirements of regulatory policies for small and medium-sized banks to issue and manage wealth management products, small and medium-sized banks are vying to lay out the distribution track of wealth management products, and the competition in the agency market is becoming increasingly fierce.
(2) Incidents of net breaking of wealth management products on behalf of consignment products occur frequently
Judging from the scale and net-breaking performance of wealth management products since 2022, there have been many net-breaking events in both consignment wealth management products and existing products, and the trend of the two is relatively consistent, and the consignment wealth management products have not shown obvious advantages.
In the first half of 2022 and the end of 2022, the wealth management market experienced two net breaking tides, and the second net breaking tide was particularly serious, with the net breaking rates of existing products and consignment products increasing by 175.23% and 212.07% respectively in November 2022 compared with the previous month. Although there has been no major net breaking tide in the wealth management market after two net breaking tides, and there has only been a brief increase in the net breaking rate at the end of 2023, in the current context of insufficient domestic economic recovery momentum and complex and changeable international environment, it will take time for the wealth management market to fully recover, and small and medium-sized banks need to put more effort into the selection of wealth management products for distribution in order to screen out products with better performance.
Fourth, the era of wealth management agency sales has come, and small and medium-sized banks will face two major challenges: "product selection ability" and "risk monitoring".
After the issuance of the New Regulations on Asset Management in 2018, the wealth management market began to fully enter the era of net worth, and bank wealth management lost its original attributes such as "capital protection", "risk-free" and "rigid payment". The change in investors' perception of bank wealth management risks, coupled with the impact of epidemic prevention and control in the bond market at the end of 2022 and the Federal Reserve's interest rate hike, led to a large net break in the wealth management market. After the net tide, the transformation of net worth has deepened, the attention of institutional risk warning has been enhanced, the risk appetite of investors has decreased significantly, and the confidence of the wealth management market needs to be rebuilt urgently.
With the normalization of bank wealth management, the development idea of consignment business of "channel is king" in the past has led to frequent incidents of consignment wealth management products, which can no longer meet the development needs of refined and differentiated institutional wealth management business. Therefore, in the new era of consignment business development, institutions are faced with two major challenges: "product selection ability" and "risk monitoring". The challenge of "product selection ability", that is, how to choose financial products with lower risk, better performance and better prospects; The challenge of "risk monitoring" is how to monitor and control the risks of the net breakage and drawdown of the wealth management products sold on behalf of the company.
In the current policy side of the tone has been set, whether the bank side is self-operated or consignment, the ability to select products and risk early warning is a huge test for the banking business side, because investors uphold the concept of "income theory" and "seller responsibility", the agency is also facing greater pressure to break the net accountability. Small and medium-sized banks need to formulate product selection plans suitable for the region according to the customer characteristics, investment needs, risk appetite, etc. in the service area, and also have a reasonable and sound financial product evaluation system and evaluation model, so as to be able to select the most suitable financial products based on factors such as historical product performance, asset allocation, and investment strategy. In terms of risk monitoring, it is necessary for the agency to achieve timely and effective risk assessment and early warning for the wealth management products being distributed, and good risk warning and timely risk avoidance can effectively help the agency reduce losses for customers, avoid possible customer loss and strengthen customer viscosity, so it is necessary to establish a scientific and effective risk early warning system to achieve timely monitoring and early warning of interest rate risk, credit risk, strategic risk, market risk, etc.
In recent years, whether it is regulatory policies, guidance or window guidance, it has revealed strict supervision and control of the asset management market. Banks (mostly small and medium-sized banks) that do not have the qualifications to set up wealth management companies will not be able to issue new wealth management products, and the original wealth management products will be gradually withdrawn, and small and medium-sized banks will inevitably become the distribution channels of large institutions. Therefore, in the context of the continuous narrowing of the net interest margin of banks, wealth management agency sales may become a "must fight" for small and medium-sized banks, and the construction of the selection ability and risk early warning of agency products will be the key to success or failure.
In response to the two major challenges faced by the above-mentioned small and medium-sized banks in the process of consignment business, Puyi Standard has exclusively created an AI insight and optimization system, aiming to solve the problems and pain points in the whole process of consignment business in one stop. The system can comprehensively provide functions such as consignment data inquiry, regional consignment monitoring, issuer analysis, consignment product screening, consignment product pool tracking, risk early warning reminder and other functions to meet the diversified needs of consignment agencies.
—Function Introduction—
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- Financial monitoring
- Consignment management
- Risk warning
- Information reports
- System settings
Note: [1] Data statistics: statistics are based on total shares + no shares.
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