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No concession on 20% foreign stake ceiling in banks

(Xinhua)
Updated: 2008-04-08 16:39

China's banking authority clarified on Tuesday that the rules that a single foreign-funded institution can hold up to a 20 percent stake in a Chinese bank remain unchanged.

The move comes after a widespread misinterpretation of the new planned rules, which many thought increased the shareholding ceiling for foreign institutions to 25 percent.

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Under the draft new rules, sent out for public consultation on March 27, all foreign investors should hold at least 25 percent of voting shares directly or indirectly to control a Chinese-funded financial institution.

It doesn't mean that the 20 percent shareholding ceiling for an individual foreign-funded financial agency has changed, an official with the supervisory rules and regulation department of the China Banking Regulatory Commission (CBRC) said on Tuesday.

The rules are strengthened in response to the cases of the de facto controlling positions held by some foreign financial institutions with less than 20 percent shares in some Chinese banks, the compiler of the new regulation said on Tuesday.

The latest move will create a more prudent supervision of shareholding relations, said the compiler.

CBRC chairman Liu Mingkang has reiterated on many occasions that the foreign-funded financial institutions can hold controlling stakes in non-listed Chinese-funded ones.

Liu, however, has underscored that if the overseas capital takes up at least 25 percent of the total shares, the original Chinese-funded bank will be treated as a foreign-funded one subject to different supervision rules.

The compiler said the latest rule is a supplement to the measures launched in 2003, which will still function if the new regulation is approved.

Foreign-funded banks on the Chinese mainland recorded $171.46 billion in gross assets by the end of 2007, a growth of 47 percent over the level at the beginning of the year, according to the central bank report.