Caixin
May 08, 2021 03:04 AM
FINANCE

China’s Banking Regulator Revamps Financial Licensing

Online banks and insurance platforms are required to display licenses clearly on their web pages.
Online banks and insurance platforms are required to display licenses clearly on their web pages.

China’s top banking regulator will implement a new licensing system July 1, consolidating a welter of licenses for financial institutions into three categories: financial, insurance and insurance intermediary.

The proliferation of licenses under the China Banking and Insurance Regulatory Commission (CBIRC) involves different management requirements for various categories, creating administrative difficulties, an official at the commission said. Inspections found that there are some problems in the management and use of licenses in banking and insurance institutions, the official said.

In recent years, more and more financial activities are carried out on the internet, and some businesses provide financial services without licenses. Some major commercial banks have been found skirting regulations by setting up nonlocal departments or offices without approval.

For instance, national joint-stock commercial banks China Merchants Bank Co. Ltd. based in Shenzhen, China Guangfa Bank Co. Ltd. based in Guangzhou and Industrial Bank Co. Ltd. based in Fuzhou operate unlicensed investment banking divisions, departments serving their major customers, and others in the financial hubs of Beijing and Shanghai.

In January 2018, the CBIRC urged local branches and banks to investigate or rectify unregulated businesses. Last year, the regulator issued a notice reminding the country’s 12 national joint-stock commercial banks that they must rectify unlicensed businesses. The banks’ nonlocal departments were ordered to close or merge with the banks’ branches if they cannot obtain the necessary licenses.

Under the CBIRC’s new system, financial licenses apply to banks including policy institutions, large, joint-stock, urban commercial, private, foreign, and rural small and medium-sized banks and their branches. Such licenses will also be required for companies involved in financial asset management, trusts, enterprise group finance, financial leasing, auto finance, currency brokerage, consumer finance, bank finance and financial asset investment as well as other nonbank financial institutions and their branches.

Insurance licenses apply to insurance companies, insurance asset management companies and their branches. Insurance intermediary licenses apply to insurance agencies and insurance brokerage companies.

The CBIRC requires that banks and insurance companies display original licenses on their business premises. Insurance intermediary branches that do not have the original licenses are required to display a copy of the license stamped with the official company seal. Online banks and insurance platforms must display their licenses clearly on their web pages, the CBIRC official said.

The new rules prohibit transferring, lending, forging or altering licenses. When a new or renewed license is issued, banks and insurance companies are required to publicly disclose it within 30 days in newspapers or on their official websites, according to the rules.

Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com)

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