Regulation is expected to be further tightened in China, but product diversity will be promoted by banks that get the greenlight from the Chinese government to set up wealth management subsidiaries, according to Angel Xin (pictured), head of derivatives and alternative investments at PingAn Bank.
How have the tighter government regulation on ‘implicit guarantees’ shaped the structured products market in China?
Almost all banks in China have started the issuance of structured products since the beginning of last year, including both normal type structured products and ‘implicit guaranteed’ structured products. The majority is ‘implicit guaranteed’ structured product.
Under the tighter government regulation, banks without derivative licenses are restricted from issuing any structured product, thus reducing a large volume of ‘implicit guaranteed’ structured products. This is because those banks without licenses tend to lack the resources for normal structured products and that is exactly why their issuance has been targeted by the regulation. From this point of view, the license control is very effective.
China’s regulators have rolled out new measures to allow banks to set up wealth management subsidiaries. Does this mark a change in tone from regulators after their crackdown on off-balance-sheet products?
We do not observe any change in tone on the setting up of wealth management subsidiaries. Wealth management subsidiaries have always been encouraged by the Chinese regulator since the new wealth management regulation.
Under the new wealth management arm, what kind of products do you plan to introduce?
Capital protected structured notes and Capital protected structured deposit. We have already aligned our products to the new regulation since last year. The products we release currently are also capital protected structured notes.
What is your outlook for China’s structured products business for the rest of the year and next year?
The regulation will be even tighter for next year. Since there are already several wealth management subsidiaries opened, further regulation is expected.
Besides, more diversified products will be provided by wealth management subsidiaries and other financial institutions.
* The article represents only personal views, not that of PingAn Bank.
Angel Xin is head of structured product at PingAn Bank, a leading commercial bank in China and is part of PingAn Group. Prior to that, she worked at AXA since 2012. In her role, Xin set up the structured products business and is responsible for managing the full product line. During the past two years, PingAn bank has become one of the most active structured product providers in China. Prior to joining PingAn Bank, she spent four years at HangSeng Bank, launching structured products for both retail and corporate clients in China. Before joining AXA, she was a financial regulator in China.