Private companies apply to set up banks
June 29, 2015 Category Finance, Weekly
The China Banking Regulatory Commission (CBRC) on June 26 officially started accepting applications from private enterprises to invest in the banking sector, which has long been strictly regulated. “All channels for private capital to enter the banking sector are now open,” CBRC Chairman Shang Fulin told a news conference in Beijing. More than 40 domestic private enterprises have expressed interest in setting up banks. Shang said that the CBRC will decide 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 CNY500,000 for individual bank accounts. The opening to private capital is seen as the government’s strategy to transform the country’s banking structure, which is dominated by large state-owned lenders, and address the issue of financing difficulties of smaller and startup companies in a slowing economy, the China Daily reports. While the guidelines state that foreign and domestic private investors shall be treated equally, Shang said that the 20% shareholding restriction of foreign investors in a Chinese bank remains unchanged. China launched a pilot program in 2014 under which five fully private banks were established, owned by companies such as Alibaba Group Holding and its domestic rival Tencent Holdings. All five private banks are now in operation.
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