Friday, March 14, 2014

China sets up privately owned banks

  • China will launch a trial programme for private firms to set up banks, the country's banking regulator said Tuesday, with Internet giants Tencent and Alibaba reportedly among the first applicants.
  • Most Chinese lenders are state-controlled and banks founded by private companies are extremely rare, while access to lending is a key element of the Communist authorities' control of the economy.
  • The first batch of the five banks will be opened in the cities of Tianjin, Shanghai, Zhejiang Province and Guangdong Province as a pilot project.
  • Ten private companies’ viz. Internet giants Alibaba and Tencent have been selected to take part in the preparation work for setting up the banks.
  • Each of the banks will be co-sponsored by at least two private capital providers
  • The banks will operate “independently” and will assume responsibility for risks and losses as well as profits.
  • The private banks will need to have adequate net capital, a specific business strategy and a mechanism to prevent risks from spreading and to protect depositors’ interests.
  • Financial services of private banks will be oriented towards small and micro businesses as well as residential communities.
  • No timetable has been given for when they need to be operationally ready.

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