The disappearance of 3 billion yuan in China's private banking system highlights once again the banks’ weak internal controls and the risks associated with the sale of «innovative» wealth-management products.
An accidental inquiry from an investor exposed the fact that the wealth-management products (WMPs) sold by China Minsheng Bank’s private banking accounts didn’t even exist. When shocked investors rushed to the bank, they found the head of the branch had been taken into police custody and the supposed due payment date had passed, as the Hong Kong daily «South China Morning Posts» (SCMP) reported on Wednesday.
Investors are still waiting for compensation as well as a detailed explanation from the bank.
Detained on Friday
Minsheng said on Tuesday it has launched a working group to co-operate with police to investigate the case. Zhang Ying, the head of Minsheng’s Hangtianqiao branch, who was detained on Friday. The bank said it will try its best to safely secure the funds and assume legal responsibility.
The Minsheng case involved an «innovative» WMP in which yields were amplified by purchasing a secondhand WMP. Consecutive interest rate cuts and a flood of WMPs sold on the mainland market over the past three years have already seen wealthy investors shun common WMPs with unattractive yields, the «SCMP» writes.
