Caixin
Mar 12, 2014 06:44 PM

Private Banks in Pilot Will Have Four Models to Choose From

(Beijing) – The five planned privately owned banks will adopt one of four models, an official with the China Banking Regulatory Commission (CBRC) says.

The regulator announced the names of the companies that can open the banks on March 11. Shang Fulin, chairman of the CBRC, said their opening date depends on whether the founders have met the regulator's standards.

Each of the banks will be backed by two companies. The bank proposed by Zhejiang Alibaba E-Commerce Co., owner of the country's largest e-payment service, Alipay, and automobile parts manufacturer Wanxiang Group will use a model called "small deposit, small loan." This means that each client's deposit cannot exceed a limit, and the amount they can borrow is also capped, the official said. He did not say what those levels are.

This model is intended to allow Alibaba to make the most of its huge user base, which comprises mostly small and family businesses operating online, the CBRC official said.

Social networking company Tencent Holdings and its partner, Baiyeyuan Investment, will use a model called "big deposit, small loan," which requires a minimum deposit to open an account and also sets caps loan sizes.

Tianjin Shanghui Investment (Holdings) Co. and Huabei Group, a copper producer, are preparing a bank that the CBRC official said can serve only corporate clients.

The areas of expertise for the other two pairs – Shanghai-based investment companies JuneYao Group and Fosun Group, and electrical equipment maker Chint Group and industrial chemicals producer Huafon Group, both from the eastern province of Zhejiang – were not spelled out.

The standards Shang said the planned private banks had to meet include requirements for the founders' financial strength and ability to absorb losses. "The controlling party's assets must not be lower than a limit," the CBRC official said.

The CBRC has also required that the founders be controlled by Chinese nationals and have most of their assets inside the country. It says the banks cannot be incorporated in a tax haven.

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