Caixin
Jan 09, 2012 04:20 PM

City, Rural Banks Knock at IPO Approval Door

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Regulators appear ready to re-open the door for commercial bank listings by inviting the nation's smaller banks to go public in 2012.

The China Securities Exchange Commission (CRSC) wants to end a five-year moratorium for bank IPO approvals, Caixin has learned, and modify its listed-bank asset requirements in a way that encourages flotations.

A source close to CSRC said the agency has submitted its proposals for changing bank listing requirements to the State Council, which could make a decision soon.

One proposed modification would clear the way for listings by many of the nation's so-called "city" and "rural" banks, many of which are controlled by a local government, by cutting the threshold for IPO-eligible banks to 70 billion yuan in total assets from the current 80 billion yuan.

According to public information, China's 23 unlisted city banks could qualify for IPOs on mainland stock exchanges under the revised rules. Each reported assets of at least 70 billion yuan at the end of 2010. In addition, a CBRC source said, more than 10 rural banks would likely meet the proposed standard.

To date, regulators have barred most city and rural banks from stock exchange fund-raising but opened the doors to China's largest, state-owned banks, said Guo Tianyong, director of China Banking Industry Research Center at the Central University of Finance in Beijing. Regulators set this course after reasoning that IPO approvals should begin with major market players and, if investors responded well, expand to smaller banks.

Between 1991 and 2010, 16 major banks launched public offerings on mainland, Hong Kong and overseas stock exchanges. The most recent to go public was Agricultural Bank of China, which raised US$ 22.1 billion yuan in Shanghai and Hong Kong.

Three city banks – Bank of Beijing, Bank of Nanjing and Ningbo City Commercial Bank – listed in 2007. But similar IPO projects never passed the planning stage. Many were blocked due to regulatory concern over shareholder structures and risk management.

The city-structured Bank of Hangzhou, for example, submitted a listing application to CSRC in 2007, said a source at the sovereign wealth fund China Investment Capital Corp., but got no reply.

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