Postal Savings Bank Opens Wealth Management Unit

Postal Savings Bank of China inaugurated a new arm to manage wealth management products (WMPs), the last of China’s top six state-owned lenders to set up a designated wealth management unit under a national regulatory structure.

PSBC Wealth Management Co., a wholly owned subsidiary of the Postal Savings Bank, opened for business Thursday in Beijing. The company also unveiled the first batch of products to tap the country’s 22 trillion yuan ($3.1 trillion) bank wealth management market.

China Construction Bank (CCB), the Industrial and Commercial Bank of China (ICBC), Bank of China, Bank of Communications and Agricultural Bank of China previously set up similar operations. The wealth management units of CCB and ICBC became the first to start operations in early July.

Chinese commercial banks have raced to establish designated wealth management unit as doing so allows them to operate with fewer restrictions on investments using wealth management funds under rules released late last year governing banks’ asset management businesses.

As part of a broader regulatory framework for the entire asset management industry, the rules aim to create a firewall around banks’ wealth management businesses. The goal is to separate them from banks’ other operations to break any implicit guarantee that these investments will be bailed out if they sour. The once-flourishing bank wealth management business was a focal point of regulators’ crackdown on reckless expansion of the shadow banking system and financial risks over the past several years.

Joint-stock banks and smaller city commercial banks are also creating similar new business units. China Merchants Bank, Everbright Bank, Industrial Bank, Bank of Hangzhou and Bank of Ningbo are among the smaller rivals that won approval for wealth management operations this year. As of late September, the China Banking and Insurance Regulatory Commission (CBIRC) approved 12 banks to set up WMP units.

PSBC Wealth Management will have a much larger workforce than its counterparts. The company was designed with headcounts between 600 and 1,000, more than triple the 200- to 300-member workforces of the five other state lenders’ wealth management units.

The company consists of 16 departments covering investment research, marketing, operations and risk control, including a stand-alone fintech department.

PSBC Wealth Management Chairman Wu Yaodong joined the company from Founder Securities Co. Wu, a former vice president of the brokerage house, has rich experience in the mutual fund business and will help the company to develop its fund management business, said a senior executive of the Postal Saving Bank.

Company General Manager Bu Yanhong is a veteran wealth management executive at the Postal Savings Bank, and Deputy General Manager Liu Lina previously worked for the CBIRC.

The first products launched by PSBC Wealth Management include index-tracking products, fixed-income product-based investment plans and retirement themed products, according to Bu.

Postal Savings Bank’s well-established, extensive network is expected to benefit the new subsidiary’s business, company executives said. According to the bank’s website, the Postal Savings Bank operates about 40,000 branches across the country, the most among all banks. Its services access 600 million retail customers, or 40% of the country’s total population.

Contact reporter Han Wei (weihan@caixin.com)

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