Chinese bank may be liable for wealth management defaults

China’s Huaxia Bank may be held partly liable for non-performing wealth management instruments that were sold by an employee without permission, Reuters reported, citing a bank official on Tuesday. Police are currently investigating an employee at the bank’s Jiading, Shanghai branch for selling Zhongding Wealth Investment Center products without authorization, the bank said Monday. The bank may be held partly responsible by the police, but “it cannot be understood that the bank will pay for the default,” a Shanghai regional representative told Reuters. It remains unclear whether banks will be on the hook if more third-party products default in the future, as this is the first high-profile incident. Wealth management products, which offer higher interest rates than traditional savings accounts, have proliferated in the last few years and some analysts believe they may pose a threat to the banking system.