Mainland banking sector to allow private capital investments
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.