Banks picked to offer retirement accounts

China’s finance regulator announced the first batch of banks and insurance institutes participating in the new private pension scheme, designed as a supplement to the national social security system.

In a notice released on Friday, the China Banking and Insurance Regulatory Commission said that 23 banks and 11 insurance institutions, including the Bank of China, the Industrial and Commercial Bank of China and the Agricultural Bank of China, have been given permission to open and run personal accounts under the private pension scheme.

According to the notice, commercial banks can offer services such as opening, canceling or transferring personal accounts for pensioners and help manage their capital. They can also sell financial products, which are regulated by the government, on a commission basis.

The commission said that as the private pension scheme is in its infancy and may be of critical importance to the retirement plans of the average person, participating institutions are being held to very high standards in terms of business operations, customer service, risk management and social responsibilities.

For example, the net tier 1 capital — an index measuring whether a financial institution has sufficient capital — of selected banks had to have reached over 100 billion yuan ($14 billion) by the third quarter of this year.

Dong Ximiao, chief researcher of Merchants Union Consumer Finance Company, based in Shenzhen, Guangdong province, said in an interview with people.cn that the participating institutions have more capital and offer more services than other banks. They also have many branches and larger pools of customers who can help drive the sustainable development of the private pension scheme.

Dong said that the banks can develop more products by focusing on traditional means such as investments and savings.

According to the regulatory commission, the banks are required to report their plans for system implementation, personnel structure and product management to government bodies within 10 days of offering private pension services. The commission said it will constantly monitor operations and risks.

It also said that these institutions have already begun offering such services in pilot cities, which have not yet been published, and that the scheme will be extended to other cities in the near future.