Main­land bank­ing sec­tor to al­low pri­vate cap­i­tal in­vest­ments

The China Post - - COMICS - BY LI XIANG

Main­land China’s bank­ing reg­u­la­tor on Fri­day of­fi­cially started ac­cept­ing ap­pli­ca­tions from pri­vate en­ter­prises to in­vest in the sec­tor, which has long been strictly reg­u­lated.

The move rep­re­sents a tran­si­tion from last year’s pi­lot pro­gram to al­low the cre­ation of pri­vate banks as a rou­tine prac­tice. It is also a ma­jor step in lib­er­al­iz­ing China’s fi­nan­cial sec­tor.

“All chan­nels for pri­vate cap­i­tal to en­ter the bank­ing sec­tor are now open,” China Bank­ing Reg­u­la­tory Com­mis­sion (CBRC) Chair­man Shang Fulin told a news con­fer­ence in Bei­jing.

Guide­lines is­sued by the CBRC on Fri­day said that to be el­i­gi­ble, pri­vate com­pa­nies must:

— have been prof­itable in each of the past three years

— pos­sess net as­sets com­pris­ing more than 30 per­cent of to­tal as­sets af­ter the year-end bonus dis­tri­bu­tion

— achieve an out­stand­ing bal­ance of eq­uity in­vest­ment that is less than 50 per­cent of net as­sets

— have a sound cor­po­rate gov­er­nance struc­ture and rep­u­ta­tion and clean credit and tax records.

More than 40 do­mes­tic pri­vate en­ter­prises have ex­pressed in­ter­est in set­ting up banks. Shang said that the CBRC will an­nounce de­ci­sions on those ap­pli­ca­tions within four months af­ter they are made.

He also noted that pri­vate banks must have ar­range­ments to deal with “resid­ual risks” that are not cov­ered by the de­posit in­sur­ance sys­tem, which pro­vides cov­er­age of up to 500,000 yuan (US$81,000) for in­di­vid­ual bank ac­counts.

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