(Yicai) July 14 -- China's National Financial Regulatory Administration has introduced new regulations for financial institutions, requiring them to strictly fulfill their suitability assessment by selling appropriate products through proper channels to compatible customers.

The Administrative Measures for the Suitability of Financial Institution Products, which will take effect from Feb. 1 next year, consist of five chapters and 49 articles. The regulations focus on "understanding products, understanding customers, suitability matching, and compliant recommendation and sales."

Financial institutions are responsible for product risk rating and customer assessment, while consumers must make independent choices, exercise caution in decision-making, and bear the associated risks, according to the new measures, highlighting the principle of "seller responsibility and buyer accountability."

The measures will shift the protection focus upstream, helping consumers reduce risk losses while encouraging financial institutions to enhance their compliance capabilities and overall competitiveness, according to a relevant official from the NFRA.

Regarding differentiated management, investment-type products must be categorized into at least five risk levels, ranging from low to high, with dynamic adjustments. The measures distinguish between professional and retail investors, simplifying the process for the former group while enhancing protection for the latter.

The new measures can reduce sales misguidance and risk mismatches, enhance consumer trust, and assist in preserving and appreciating residents' wealth, said Wen Bin, chief economist of China Minsheng Bank. In addition, they will optimize the financial supply and support the real economy, Wen added.

In the next step, regulatory authorities will promote the establishment of industry self-discipline standards, strengthen supervision and guidance over financial institutions, and cultivate consumer risk awareness, the official noted, adding that financial institutions need to integrate suitability assessment into the entire process, achieving healthy development via collaboration among systems, policies, and personnel.

Editor: Martin Kadiev