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China promotes private banks

Updated: Jun 26,2015 4:44 PM

The State Council general office released a guideline on June 26 aimed at promoting the development of private banks by encouraging and guiding private capital to enter the banking industry.

The government also aims to provide more individualized and convenient financial services for medium, small and micro-sized enterprises; rural areas, agriculture and farmers; and mass entrepreneurship and innovation.

The guideline requires that private, state-owned and overseas capital should be treated equally. Private enterprises that meet specified conditions are encouraged to set up banks - and private banks are encouraged to innovate in products, services, management and technologies, to bring a new driving force into the industry.

The supervision department should examine according to law to make sure failed private banks are banned from operating. Private banks will be guided to establish a permanent risk-prevention mechanism to ensure the financial market runs efficiently and steadily.

The government also encourages private capital to enter existing financial institutions of the banking industry. Mixed ownership reform will be promoted by law - private capital participate in changing rural credit cooperative into rural commercial bank and risk management of financial institutions.

Conditions for private banks entering financial institutions of banking industry include: good management structure and effective organization measures; good reputation, credit records and tax payment records; a long development period and steady operation; strong operation and management abilities; financial strength; assets in good condition; profit in the recent three fiscal years; net assets accounting for over 30 percent of the total assets after year-end distribution; equity investment balance account no more than 50 percent of the net assets.

The preparation period for private banks is six months - starting from the approval day - and those that are unable to start the preparation work on time should submit an extension request to the Banking Regulatory Commission one month before the deadline. Only one extension request may be permitted, and for a maximum of three months.

Private banks should open for business within six months after obtaining a license - and those that are unable to open for business should submit an extension request to the local banking bureau one month before the deadline. Only one extension request may be permitted, and for a maximum of three months.