Nation consults on rules for financial holding companies

China’s central bank has started seeking internal feedback on draft rules regulating financial holding companies, targeting big-name conglomerates that hold multiple financial licenses, said two sources with direct knowledge of the matter.

Financial holding conglomerates subject to the rules will not only face new requirements on capital adequacy, but may also be forced to restructure and put part of their nonfinancial assets in a separate entity, the sources told Reuters, declining to be named due to the sensitivity of the matter.

To separate risk, the draft rules seek the creation of “firewalls” between different units in one financial holding company, they said.

China does not have any specific rules regulating financial holding companies. The new regulations being drafted by the People’s Bank of China (PBC), will be a major step toward curbing systemic financial risks.

They would also significantly increase compliance costs for financial holding conglomerates, some of which are strongly pushing back against the move during the consultation period, which is not open to the public, the sources said.

Chinese policymakers have previously warned about the opaque crossholding structures and “barbaric expansion” of financial holding companies, saying the control of multiple financial institutions by conglomerates and their ability to condu sector risks.

Th stabil ber, n congl HNA

Th cial finan total a ity to cial u divisi

Bu ally b move