(Yicai Global) May 28 -- China Construction Bank has established a wholly-owned wealth management unit after obtaining corresponding approval from banking regulators.

This, CCB's first wealth management subsidiary, has registered capital of CNY15 billion (USD2.2 billion) and has received it business license, the bank announced yesterday. The unit's business scope covers public issuance of wealth management products, their non-public issuance to qualified investors, investment and management of entrusted property and provision of financial advising and consulting services, company registry information shows.

The China Banking and Insurance Regulatory Commission issued a policy document on commercial banks' establishment of wealth management units in October last year, and 31 banks had released plans for setting up wealth management units as of April this year. Another large state-backed bank, Industrial and Commercial Bank of China, has also obtained approval to open a wealth management company.

Chinese banks used to directly provide wealth management services to clients, but this led their customers to regard risk-bearing ones as very safe deposit products and impose rigid requirements for the income from them, and the proportion of wealth management products to banks' deposits also gradually became ever bigger.

Transparency now allows high-risk financial products to now be packaged with other wealth management products, which may trigger systemic risks. The setup of banks' wealth management units can form an effective buffer among banks' units, their shareholders and other interested parties to fend them off.

Editors: Tang Shihua, Ben Armour