The scrutiny of the wealth management products will be a top priority for China's banking regulator this year amid a surge in the business and concerns about risks in the sector, a regulatory official said, according to media reports.

According to Z-Ben Advisors, Yan Qinmin, assistant to the China Banking Regulatory Commission’s chairman, said investors’ insufficient understanding of wealth management products, including risks associated with inadequate disclosure of information and strains placed on banks’ liquidity, have caused cash pool wealth management products to enter dangerous territory.

"Some lenders continued to carry out irregular 'cash pool' wealth management activities," Wang Yanxiu, an official at CRBC, said this week, as reported by Shanghai Daily.

Currently there are RMB 7.1 trillion (around $1.14 trillion) of outstanding wealth management products, a surge of 13 times from the RMB500 billion in 2007. But Wang assured that the risk is under control as the combined financial products account for about 5 per cent of the banks' total assets, the report said.

The CBRC said two weeks ago that it would target off-balance sheet financial products as one of the top priorities this year. It prohibits the sale of unauthorised products and misleading customers. 

According to a Bloomberg report, released last week, the regulator ordered lenders to open telephone hotlines for customers to report staff attempting to sell unauthorised wealth management products. The Shanghai branch of the China Banking Regulatory Commission and the city’s banking association have also begun taking customer complaints on employee misconduct through their own hotlines, Bloomberg reported.

This comes after the CBRC banned bank employees from selling wealth management products without authorisation, following the incident of an employee at China’s Hua Xia bank selling a wealth management product without permission, after Chinese media said the product could not repay investors.