WMPs surge at small Chinese banks

Sales of wealth management products (WMPs) surged to more than 85% of the US$560 billion (RMB3.5 trillion) of offerings by China’s smaller financial institutions from January through September this year, increasing funding costs and credit risks, Bloomberg reported, citing credit agency Fitch Ratings. The share held by rural, city and joint-stock financiers of the US$1.92 trillion WMPs market increased to 48% from 32% in 2011, according to a report released by Fitch last week. Funding costs are increasing as banks, eager to hold onto investors, offer higher returns on their WMPs than benchmark deposit rates. The rise of WMPs is changing the stable and inexpensive deposit base into one that is “more mobile, expensive and short-term,” increasing the risk of repayment defaults by smaller banks, Fitch said.