The China Banking Regulatory Commission (CBRC) recently issued a circular calling for increased scrutiny of wealth management products (WMPs) sold at the country's banking institutions, in response to a spat of investment default cases involving several commercial banks, the Guangzhou-based Southern Metropolis Daily reported Wednesday, citing unnamed sources within the banking industry.

The circular requires banking institutions to conduct comprehensive checks on proxy sales of third-party WMPs - such as insurance, trust and fund instrument products - at their branches and to submit summary reports to the CBRC by the end of next week. According to local media, the point of the circular is to get banks to check the behavior of the customer managers and wealth management managers at their branches by reviewing documentations, watching surveillance videos and conducting random inspections of telephone recordings, among other tactics, to check whether employees are selling unapproved investment products.

As the CBRC's order comes at a time when State-owned banks are coming under fire due to reports of defaults on investment products sold at their branches, several commercial banks contacted by the Global Times Wednesday declined to discuss the matter.

Last month, dozens of investors complained that a Huaxia Bank branch in Shanghai's Jiading district sold a WMP which could not repay them when it matured. Huaxia later denied knowledge of the product, which it said had been sold by an employee without permission.

Then, Industrial and Commercial Bank of China came under the spotlight after a former employee at its Jinhua branch in Zhejiang Province allegedly sold an unauthorized WMP to local villagers, the National Business Daily reported last Wednesday.

"Although these two banks seem not to be involved in the product contracts between investors and investment companies, they may still need to shoulder part of the liabilities because of internal management and supervision loopholes," Zhao Xijun, deputy dean of the School of Finance at Renmin University of China, told the Global Times.

Even though banks may sell third-party WMPs which claim to offer return rates above interest on savings, these institutions do not guarantee such products can deliver what they promise, Zhao noted.