The growth of commercial banks' off-balance-sheet wealth management products has slowed noticeably as regulators have tightened oversight to control risk.

A report released on Tuesday by global accounting and consulting firm EY, formerly known as Ernst & Young, showed that the volume of outstanding off-balance-sheet wealth management products reached 7.89 trillion yuan ($1.24 trillion) for large commercial banks in China by the end of 2017, and its growth rate was 9.23 percentage points lower year-on-year.

For listed national joint-stock commercial banks, the volume of outstanding off-balance-sheet wealth management products hit 7.97 trillion yuan, roughly the same as the volume for large commercial banks, dropping by 12.1 percent year-on-year.

Meanwhile, an increasing amount of off-balance-sheet wealth management products has transformed into on-balance-sheet products due to a stepped-up regulatory crackdown on financial irregularities.

As of the end of 2017, the outstanding volume of on-balance-sheet wealth management products for large commercial banks rose 19.1 percent year-on-year to 2.35 trillion yuan, according to the EY report that reviewed 41 listed banks in China.

The nation's central bank, foreign exchange administration and financial regulators jointly issued the new guidelines for the asset management industry on April 27.

"The implementation of the new asset management regulation in 2018 has posed stricter requirements on the future development and transformation of the wealth management business of banks," said Steven Xu, partner of financial services at EY Hua Ming LLP.

"The new regulations will help transform the current business practices in terms of net-value product management, banning firm commitment to redemption, prohibiting pool of funds business, limiting the duration mismatch between nonstandard assets and asset management products, and enhancing capital measurement, provisioning of reserves and information disclosure," Xu said.

As a result, banks must improve their research, investment and asset allocation abilities to attract investors with attractive returns on investment, he added.

This year, China will continue to strictly regulate illegal and irregular financial activities, toughen penalties for such irregularities, and prevent banking and insurance institutions from taking a wait-and-see attitude and tackling these problems passively, the China Banking and Insurance Regulatory Commission said on Monday. The regulator will also step up regulatory reform efforts to ensure that the adjustment of regulatory responsibilities and the crackdown on financial irregularities will be synergistically carried out.

Chinese banks are in the process of transforming their development model from fast growth to quality growth. While the total assets of 41 listed banks increased by 6.85 percent year-on-year by the end of 2017, much slower than the 13.95 percent growth in the previous year, the net profit realized by these banks rose 5.1 percent year-on-year in 2017, faster than the 3.68 percent growth in 2016, according to the EY report.