Bank of China has become the first of the “big four” Chinese state-owned commercial banks to confirm that it will create an independent unit to invest funds raised from selling wealth management products, Caixin reports.
The new subsidiary, Bank of China Wealth Management Co, will manage an initial $1.4 billion in capital and will focus on raising funds through wealth management products and managing those funds.
The People’s Bank of China has asked the country’s banks to create this kind of unit by 2020 as part of its April overhaul of the asset management industry, designed to reduce risk in the enormous financial industry. Bank of China is the 15th lender to do so, with China Merchants Bank and Bank of Nanjing already having announced similar plans.
China’s financial regulators announced the same day that wealth management units will be permitted to invest directly in the stock market, which some analysts see as another measure designed to prop up the struggling Shanghai and Shenzhen exchanges.
The move could create problems for the mutual fund industry, as commercial banks—with their huge client bases and resources—will now effectively become direct competitors to mutual funds.