Pri­vate bank trial poised for ex­pan­sion dur­ing 2015

China Daily (Canada) - - BUSINESS - By JIANG XUEQING jiangx­ue­qing@chi­nadaily.com.cn

China plans to ex­pand a trial pro­gram to al­low the cre­ation of pri­vate banks and ease the en­try of pri­vate cap­i­tal into the bank­ing sec­tor next year, the China Bank­ing Reg­u­la­tory Com­mis­sion chair­man said on Tues­day.

Shang Fulin said the CBRC will “ex­pand pi­lot pro­grams for pri­vately funded banks, ac­cel­er­ate the launch of guide­lines on the de­vel­op­ment of such banks, and im­prove their reg­u­la­tion frame­work”.

TheCBRChas al­ready ap­proved ap­pli­ca­tions for the cre­ation of five pri­vately funded banks this year and helped push for­ward their cre­ation in terms of build­ing cor­po­rate gov­er­nance and risk man­age­ment frame­works.

OnDec 12, the Shen­zhen Bank­ing Reg­u­la­tory Bureau gave the green light, for in­stance, to In­ter­net gi­ant Ten­cen­tHold­ings Ltd to start its own bank­ing op­er­a­tion, Webank, tak­ing a 30 per­cent stake in the business.

With regis­tered cap­i­tal of 3 bil­lion yuan ($482 mil­lion), Webank will fo­cus on fi­nan­cial ser­vices in­clud­ing de­posit and loan ser­vices to in­di­vid­ual con­sumers as well as mi­cro-sized and small en­ter­prises.

China has been en­cour­ag­ing more pri­vate cap­i­tal into ru­ral com­mer­cial banks, es­pe­cially. The na­tion is also urg­ing pri­vate com­pa­nies to merge, ac­quire and re­struc­ture prob­lem­atic ru­ral credit co­op­er­a­tives to defuse in­sti­tu­tional risks and pro­mote own­er­ship re­form, the CBRC said.

Shang said the reg­u­la­tor will ex­pand the pi­lot pro­gram by en­cour­ag­ing wider par­tic­i­pa­tion of pri­vate cap­i­tal.

It will also pro­mote in­creased pri­vate share­hold­ing in, and the cre­ation of, vil­lage banks, and work to at­tract pri­vate cap­i­tal into in­sti­tu­tional re­struc­tur­ing and own­er­ship re­form of ru­ral credit co­op­er­a­tives, all based on equal terms with other forms of cap­i­tal.

As a re­sult, he said, or­ga­ni­za­tions will have more di­ver­si­fied share­hold­ings and stronger cap­i­tal bases, op­er­a­tional vi­tal­ity and com­pet­i­tive­ness.

The pre­ferred par­tic­i­pants are pri­vate com­pa­nies with steady op­er­a­tions, said the­bank­ingreg­u­la­tor, and­which­have the abil­ity to re­plen­ish cap­i­tal con­tin­u­ously.

Wen Bin, prin­ci­pal re­searcher atChina Min­sheng Bank­ing Corp Ltd, said: “The pri­vately funded banks al­ready ap­proved by the gov­ern­ment are tar­get­ing ar­eas that lack fi­nan­cial ser­vices, such as com­mu­ni­ties and small busi­nesses.”

Mar­ket in­sid­ers say com­pa­nies across China’s northeastern, cen­tral and western re­gions have sub­mit­ted ini­tial plans for the es­tab­lish­ment of pri­vate banks, and theCBRCis con­sid­er­ing pri­vate cap­i­tal to be used to set up banks in many re­gions where fi­nan­cial ser­vices are still weak.

This year, 14 non-bank fi­nan­cial in­sti­tu­tions were cre­ated whose con­trol­ling in­ter­est is held by pri­vate com­pa­nies, with another 108 vil­lage banks cre­ated us­ing pri­vate cap­i­tal.

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