Financial Companies Face Annual "Major Test" as Sub-4 Ratings May Result in Business Restrictions

21st Century Business Herald Reporter Tang Yaohua

On March 16, the National Financial Regulatory Administration officially released the “Interim Measures for the Supervision and Rating of Wealth Management Companies” (hereinafter referred to as the “Measures”), which took effect upon issuance. This marks that any wealth management company that has been operating for a full accounting year will face an annual “big test,” with regulatory agencies implementing differentiated supervision based on the rating results.

The Measures consist of five chapters and twenty-six articles, including general provisions, regulatory rating factors and methods, organizational implementation, application of rating results, and supplementary provisions. They specify the overall requirements for the supervision and rating of wealth management companies, rating factors, basic procedures, and classification supervision. The Measures will urge wealth management companies to fulfill their fiduciary management responsibilities, accelerate industry transformation and development, and guide companies to enhance their investment research and risk control capabilities.

Six Key Modules and High Weights on Asset Management and Risk Control

The Measures establish six rating modules: corporate governance, asset management capability, risk management, information disclosure, investor rights protection, and information technology. They assign weights of 10%, 25%, 25%, 15%, 15%, and 10%, respectively, and include targeted bonus points, deduction items, and level adjustment factors to comprehensively evaluate the operational management and risk status of wealth management companies. The maximum score for the rating is 100 points.

Notably, the combined weight of “Asset Management Capability” and “Risk Management” is 50%, reflecting a clear regulatory shift from “scale-first” to “strengthening capabilities.”

Previously, regulatory authorities solicited opinions within the industry on the rating methods and conducted pilot ratings. Some leading companies performed poorly in these pilot ratings, sparking widespread discussion. Industry analysts believe this is mainly because the evaluation system introduced quality indicators such as product performance achievement rates and the proportion of products with rights, which reduced the advantage of institutions that focused solely on scaling up. Additionally, since some quantitative indicators use scale as the denominator, larger leading companies may be relatively disadvantaged, resulting in lower scores after scale-weighted calculations. Subjective scores tend to be similar across companies, making it difficult for top-tier wealth management firms to demonstrate their advantages.

Rating Levels 1–6 and S, with Business Restrictions Above Level 4

The Measures specify that the regulatory rating results are divided into levels 1–6 and S, with higher scores indicating higher risk and greater regulatory attention.

Scores of 90 points (inclusive) or above are Level 1; 80–89 points are Level 2; 70–79 points are Level 3; 60–69 points are Level 4; 50–59 points are Level 5; and below 50 points are Level 6.

The application of these ratings is a key market focus. Article 20 of the Measures states that the rating results are an important basis for the National Financial Regulatory Administration and its dispatched agencies to allocate regulatory resources, conduct market access, and implement differentiated regulatory measures.

A relevant official from the Administration stated in response to questions that: Level 1 and 2 wealth management companies operate stably with relatively good risk profiles, primarily under non-physical and routine supervision, with priority given to supporting innovative pilot businesses such as pension wealth management; Level 3 and 4 companies have certain or many risk issues, requiring strengthened supervision in key areas, necessary corrective measures, risk control of incremental risks, and reduction of existing risks; Level 5 and 6 companies face serious risk problems, requiring real-time risk monitoring, strict restrictions, and orderly risk resolution or market exit; S-level companies, which are undergoing restructuring, takeover, or market exit, do not participate in the current year’s rating.

The Measures explicitly state that for Level 4 companies, necessary regulatory corrective measures will be taken to control incremental risks and reduce existing risks simultaneously, preventing risk spread. This also means that once a company’s rating drops to Level 4 or below, some of its business operations may be restricted. Conversely, higher-rated companies will have priority in innovative business pilot programs, potentially further intensifying the industry “Matthew effect.”

Annual Ratings Completed by End of April, Results Kept Strictly Confidential

According to the Measures, the rating cycle is one year, covering the period from January 1 to December 31 of the previous year. Ratings should generally be completed by the end of April each year. The process includes self-assessment, initial review, verification, and feedback.

If the regulatory authorities discover significant circumstances during the rating period or if the risk or management status of a wealth management company changes substantially, they may adjust the rating results dynamically.

It is noteworthy that the rating results are primarily for regulatory use only, and wealth management companies must keep them strictly confidential, not using them for advertising, publicity, or marketing purposes. If a lower rating causes a company to no longer meet the conditions for certain business activities, it must not initiate new such activities; if the situation persists into the following year, the company must orderly reduce the existing volume of such business.

The Financial Regulatory Administration stated that it will strengthen supervision and guidance, ensure the implementation of the Measures, promote the steady and compliant development of wealth management companies, and better serve residents’ wealth management needs and the high-quality development of the real economy.