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Banks to launch fund companies
By Sun Min (China Daily)
Updated: 2005-02-21 06:08
The central government released a long-expected regulation yesterday to allow
some pilot commercial banks to launch fund management companies, clearing the
major policy obstacles for the reform.
The regulation, jointly issued by the China Banking Regulatory Commission
(CBRC), the People's Bank of China (PBOC) and the China Securities Regulatory
Commission (CSRC), will enable commercial banks to step into the securities
investment business, a major breakthrough in the segregated regulatory scheme of
the banking, securities and insurance sectors.
Before, domestic banks could only sell funds or provide custody services, but
were not allowed to take part in investment sales.
The regulation clarified application procedures for commercial banks that
want to set up fund management companies and also set guidelines to regulate
risk controls, affiliated trade and the daily operations of new fund companies.
Banks that are interested in investing in the fund management business should
first apply to the CBRC and PBOC and then undergo examination of CSRC to receive
licenses.
The regulation said the fund companies initiated by the commercial banks
should have diversified equity structures. CBRC officials said earlier that
domestic banks are encouraged to introduce foreign strategic investors to
jointly invest in the fund management companies and domestic private investors
can also participate.
A number of commercial banks have already submitted initial applications to
invest in the fund management business, a spokesman for the three financial
regulators said yesterday. He said the regulators would start reviews of
applications very soon. They would take the performances of the banks into
consideration when choosing the pilots, who can either directly launch a new
fund company or have their subsidiaries invest in the company.
Senior officials of the Industrial and Commercial Bank of China and China
Merchants Bank, two promising candidates for the pilot programme, have expressed
interest in the fund business and said they will implement their plans once the
official procedures and standards are clarified.
Though the innovation is expected to bring new profits for banks, the
potential risks remain a common concern. The new regulation also said a bank can
not provide custody for the funds issued by its own fund management company.
(China Daily 02/21/2005 page2)
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