Begin comprehensive self-assessment and rectification: financial management companies face a major rating "test"

◎ Reporter Xu Xiaoxiao Huang Kunchun

With the implementation of the Interim Measures for the Regulatory Rating of Wealth Management Companies (hereinafter referred to as the “Measures”), wealth management companies are now facing a systematic “major exam.”

The Shanghai Securities News reporter learned from multiple sources within the industry that many bank wealth management subsidiaries have already begun conducting self-assessments and rectification by benchmarking against the rating framework. On the front lines, bank wealth management professionals generally feel that the logic of competition in the industry is undergoing a fundamental shift— the path that previously relied on expanding scale is gradually giving way to a contest of综合实力 (comprehensive strength). Meanwhile, areas that require heavy investment but have slow returns, such as investment research and risk control, are becoming key variables determining whether a firm receives a high or low rating.

“This isn’t something you can handle by ‘last-minute emergency measures.’”

The reporter’s investigation found that, currently, some wealth management companies, based on the requirements of the Measures, have already designated lead departments to coordinate relevant special tasks overall, assess their current scoring, and formulate optimization strategies for the next steps. In addition, some leading institutions have already kicked off transformation and adjustment, and are now, in line with the rating requirements, working to optimize their own business layouts.

A person in charge of a wealth management subsidiary of a joint-stock bank told the reporter that, at present, the company has set optimizing its product structure as a core task. Specifically, there are three main directions: first, to reduce the scale of cash-management-type products; second, to increase the issuance力度 of wealth management products with longer maturities; and third, to strengthen the layout of “fixed income +” wealth management products.

Bank wealth management subsidiaries are an important part of China’s asset management industry. Their 32 wealth management subsidiaries collectively manage total assets of more than 30 trillion yuan, accounting for over 90% of the entire bank wealth management market and holding an absolute leading position. For them, regulators have already clarified the direction of ratings. How each institution can achieve higher scores under this framework depends on actual implementation.

“This isn’t something that can be addressed by ‘last-minute emergency measures.’” A staff member from the investment research and risk management department of a bank wealth management subsidiary told the reporter, noting that some of the evaluation items are difficult to improve through short-term campaigns. Regulators have fully taken into account and closed off potential spaces for regulatory arbitrage in designing the indicator system. Overall, the regulator’s intent is to guide the industry toward sound, high-quality development. The setting of assessment indicators and evaluation frameworks will drive wealth management companies to continuously optimize and adjust over the medium and long term.

The person in charge of the aforementioned joint-stock bank wealth management subsidiary said that the core challenges faced by most wealth management companies include whether human, material, and financial resources investment is sufficient. For example, in assessments related to consumer rights and interests protection, differences in staffing allocation for consumer protection staff among different institutions will inevitably lead to differences in work effectiveness.

Rating on quality, not on scale

Industry insiders have long expected that wealth management companies would be rated. Multiple interviewees said that this is a systematic assessment and a review of overall capabilities for wealth management companies.

“This isn’t just simple scoring; it’s a comprehensive ‘health check’ of the company’s overall capabilities.” A related person at another joint-stock bank wealth management subsidiary said.

The Measures clarify that regulators will rate wealth management companies across six dimensions: corporate governance, asset management capabilities, risk management, information disclosure, protection of investors’ rights and interests, and information technology. The rating results will be divided into Levels 1–6 and S. The higher the numerical value, the greater the institution’s risk, and the higher the degree of regulatory attention required.

Among the rating dimensions, asset management capabilities and risk management together account for 50%, focusing on quality-related indicators such as investment research capabilities, product performance, and risk control.

“This is basically consistent with the industry’s prior expectations of ‘emphasizing quality over scale.’ With quality indicators established as a key focus of the assessment, they are a crucial yardstick for measuring the comprehensive strength of wealth management companies.” Zhou Yiqin, a senior expert on financial regulatory policy, said in an interview with the reporter. “This is also how a quality-centered rating system is established through institutional design.”

Industry differentiation could intensify

Affected by changes in interest rates, market competition, and other factors, wealth management companies’ development paths are showing clear differentiation: leading institutions proactively reduce scale, shifting their focus toward optimizing product structures and improving quality; some smaller and mid-sized institutions, constrained by anxiety over scale, still rely on their parent-bank channels to painfully push volumes.

Under the guidance of regulatory rating implementation details, this differentiation trend may further intensify. Tian Lihui, a professor of finance at Nankai University, told the reporter that wealth management subsidiaries of large banks have clear advantages in corporate governance, risk management, and information technology, and are likely to concentrate at Levels 1–2, gaining first access to innovative business qualifications such as retirement wealth management. Meanwhile, wealth management subsidiaries of smaller cities’ commercial banks and rural commercial banks, due to shortcomings in investment research capabilities, system build-out, and the standardization of information disclosure, are prone to falling into a negative cycle of “low rating—business constraints—scale contraction.”

Zhou Yiqin said that high-rated institutions can obtain conveniences such as pilot programs for innovative businesses like retirement wealth management, while low-rated institutions will be restricted in increasing business increments, gradually compressing existing stock.

For coping strategies for wealth management companies of different sizes, Tian Lihui recommended: large wealth management companies should seize opportunities in innovation pilots, make breakthroughs in areas such as equity investments and cross-border allocations, and move from “scale leadership” to “capability leadership.” Joint-stock bank wealth management subsidiaries can focus on specific market segments, build a distinctive product lineup, and form differentiated competitive strength. Smaller and mid-sized wealth management companies, meanwhile, need to take a pragmatic approach: either deepen regional operations and provide deeper customer services, or cooperate with leading institutions to make up for shortcomings, avoiding blind expansion in a “small but all-encompassing” way. No matter the size, improving investment research capabilities, strengthening risk control, and making investor protection truly effective are the required courses for passing this “major exam” on ratings.

(Editor: Qian Xiaorui)

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