"Rigid" can be understood as the promise of the wealth management products we buy will not change no matter how the market changes. In other words, even if the wealth management product loses money, it will still protect the capital and interest for our investors, and the bank will still give us the principal and interest according to the previous agreement. This should be extremely beneficial to our investors, without taking risks and with rich returns.
So why should we strictly control this rigid redemption product? Why was it stopped? This is because the issuer has promised to protect the capital and interest, and finally it must be paid rigidly. But in fact, this wealth management product may lose money, so what if there is a loss? Who will pay for the principal and interest of this loss?
Therefore, the issuer will find a way, that is, the funds raised by issuing new wealth management products will be used for the bottom, or paid with its own funds. Then this will lay a great hidden danger to the financial market and concentrate the risk on financial institutions. If the market has been poor or suddenly drops sharply, it will lead to the redemption crisis of financial institutions. When this happens on a large scale, it will bring great influence to the whole financial system. Therefore, in order to ensure the normal operation of the whole economic system, the rigid redemption of this wealth management product must be adjusted, and it may also make investors develop the consciousness of "gaining income without taking risks", which is not conducive to the healthy development of the investment and wealth management market as a whole. For us, since this "good thing" of protecting capital and interest is gone, we need to increase our risk awareness.
In fact, there is no legal requirement for trust companies to make rigid payment in China, which is just an unwritten rule in the trust industry. Real estate trust, government financing trust and other collective fund trust plans and bank-trust cooperative wealth management products are subject to rigid redemption, while securities investment trusts are not bound by this. The original intention of the regulatory authorities to ensure compensation is to promote new business and reassure investors, but also to maintain financial and social stability and prevent trust investment losses from triggering mass incidents.