"My salary barely covers my expenses, and I wanted to invest in some financial products, but these ratings have left me completely confused……"

Dong Qing is a novice investor. After just over a year of working, she decided to set aside part of her monthly salary to invest, inspired by the investment insights shared by her seniors.

Since she doesn’t have much idle money and this is her first time venturing into financial management, her colleagues suggested that Dong Qing should purchase one or two bank wealth management products after properly insuring herself. Coincidentally, during her university internship, she opened accounts at different banks, so she logged into these banks’ apps to research the financial products.

As she browsed, Dong Qing noticed that the same daily-open FOF product was rated R4 (medium-high risk) at one joint-stock bank, but at a state-owned bank, it was rated R5 (high risk). This confused her.

According to a review by the China Banking and Insurance News reporter, this is not an error by the two banks. In fact, different banks may indeed have different risk ratings for the same financial product. Since accurate product risk assessment and precise, efficient customer matching are core to suitability management, banks should pay extra attention to improving risk evaluation levels during the distribution process to ensure that suitable products are matched with suitable investors.

Financial product risk ratings are generally divided into five levels

As a quantitative indicator, performance trends, net asset value per unit, and risk ratings are straightforward and clear, making them the first factors investors consider when choosing financial products.

For novice investors like Dong Qing, risk ratings are especially important. Before purchasing financial products, investors must undergo a risk assessment conducted by the bank and buy products corresponding to the assessment results. Investors with lower risk tolerance are advised not to purchase products that exceed their risk capacity.

Specifically, different banks usually categorize risk levels into low risk, medium-low risk, medium risk, medium-high risk, and high risk, but the criteria and methods for assessment may vary. Public information shows that one bank defines low-risk products as “mainly investing in government bonds, central bank bills, and other high-credit, highly liquid instruments with relatively stable returns,” medium-risk products as “investing in bonds, stocks, and other assets with some volatility,” and high-risk products as “mainly investing in stocks, options, and other high-risk financial instruments with large fluctuations and potential for significant principal loss.”

Another bank considers market risk and liquidity risk more heavily, defining low-risk products as “investments in money market instruments with relatively stable net asset values, rarely resulting in principal loss,” medium-risk as “partially investing in the stock market with returns influenced significantly by market conditions,” and high-risk as “large investments in high-leverage financial derivatives, with extremely high risk and potential for substantial principal loss.”

Differences in risk ratings results are caused by multiple factors

Effective February 1 this year, the “Measures for the Management of Suitability of Financial Institution Products” stipulate that financial institutions should uniformly classify the risk levels of investment products they issue and sell. The risk levels should range from at least Level 1 to Level 5. For products involving investment portfolios, the overall risk level should be based on the product’s total risk profile. If the risk ratings from the issuing and selling sides differ, the selling institution should adopt and disclose the higher rating.

“Current regulatory frameworks only specify the basic principles and elements of risk ratings but do not implement unified quantitative standards and detailed rules, which can lead to differences in risk ratings for the same product across banks,” said He Hanwen, a researcher at Puyi Standard. Besides this, differences in risk assessment models among banks, including standards, quantitative indicators, and weights for similar assets, can also result in rating discrepancies. Additionally, as distribution agents, banks may face information asymmetry with the product issuers, unable to fully grasp all underlying assets and investment strategies, and can only assess risk levels based on limited available information.

The “Measures for the Management of Suitability of Financial Institution Products” clarify that issuers should dynamically manage the risk levels of their products based on market changes and promptly inform sales channels of any adjustments. Sales institutions should disclose risk level changes in a timely manner and proactively adjust suitability matching recommendations based on product and investor information, informing investors accordingly. During the product’s open period, investors can decide whether to hold existing products.

Regarding how to determine the risk level of distributed financial products, He Hanwen explained that commercial banks must strictly follow the “Measures for the Management of Suitability of Financial Institution Products,” anchoring the product’s investment direction and structure, and evaluating core factors such as investment scope, redemption mechanisms, leverage, structural complexity, fundraising methods, credit status of issuers and related entities, and past performance of similar products, to rate the product’s risk from low to high.

A staff member from a joint-stock bank in Northeast China said in a discussion that, based on her observations, the main reason for differences in risk assessments of financial products across banks is the varying risk control standards for wealth management business. In her bank, due to a more comprehensive risk assessment system and a dedicated department handling related work, the risk ratings for distribution products tend to be more stringent, but the gap usually does not exceed one level.

Accurate risk assessment impacts the effectiveness of suitability management

The reason for paying close attention to the risk classification of financial products is that—accurate risk ratings are a necessary prerequisite for commercial banks to fulfill their suitability management obligations. The “Supervision and Administration Measures for Commercial Bank Wealth Management Business” require that banks only sell products with risk levels equal to or lower than the investor’s risk tolerance, clearly indicating the target investor scope in sales documents, and setting sales restrictions within their systems.

He Hanwen emphasized that precise product risk assessment and accurate, efficient customer matching are core to suitability management, with significant implications for protecting investors’ rights, managing investment expectations, shaping the bank’s brand reputation, and optimizing resource allocation in financial markets. Banks can strengthen in several areas: first, deepen customer insights, establish dynamic customer profiles, and integrate data on changes in risk preferences throughout the customer lifecycle; second, optimize risk matching mechanisms by aligning customer risk tolerance with product risk levels, return characteristics, and liquidity, offering diversified product options; third, enhance internal controls and supervision, establishing dynamic post-sale risk tracking mechanisms and regularly reviewing compliance with suitability obligations.

According to the “Measures for the Management of Suitability of Financial Institution Products,” an investor’s risk tolerance assessment level should range from at least Level 1 to Level 5. Investors should not undergo risk assessments more than twice in a single day at the same financial institution, and no more than eight times within 12 months. If the latest assessment result differs from previous ones, the financial institution should notify the investor and ask for re-confirmation. The validity period of risk assessment results is generally 12 months; if more than 12 months have passed without reassessment or if the investor actively reports changes that may affect their risk capacity, the institution should reassess the investor’s risk tolerance before any sales or transactions.

《中国银行保险报》记者 胡杨

《中国银行保险报》编辑 李梦溪