China’s financial regulators have told commercial banks to stop selling high-interest investment-style deposit products in recent meeting as a move to curb financial risks, two sources close to the matter told Caixin.
Regulators verbally ordered some banks to stop marketing “smart deposits” even though no written policy document has been issued, said a bank source. The products, touted as high-interest deposits, allow customers to withdraw money anytime, while the interest rate increases if the funds are left on deposit longer.
The products have been widely marketed through some small private banks since last year as a way to attract deposits.
The products violate rules for setting deposit interest rates and could cause liquidity risks for smaller banks, which raised regulators’ concerns, another bank source told Caixin.
Related: In Depth: What Are ‘Smart Deposits’?