Abu Dhabi, UAEWednesday 8 July 2020

China to let commercial lenders get into investment banking

Move is seen as a way of encouraging domestic rivals to global giants, says Caixin

View of Shanghai from the Bund. China is planning to let its large commercial lenders undertake domestic investment banking activities to compete with global rivals. Some lenders like ICBC and China Construction Bank already have investment banking arms in Hong Kong subsidiaries.  EPA
View of Shanghai from the Bund. China is planning to let its large commercial lenders undertake domestic investment banking activities to compete with global rivals. Some lenders like ICBC and China Construction Bank already have investment banking arms in Hong Kong subsidiaries.  EPA

China's securities regulator plans to grant investment banking licences to commercial lenders as part of efforts to breed industry behemoths in the face of fiercer foreign competition, business magazine Caixin reported.

A pilot scheme could involve at least two of China's largest banks getting the green light from the China Securities Regulatory Commission (CSRC) to conduct investment banking business on the mainland, according to Caixin.

The Industrial and Commercial Bank of China, the country's top lender, submitted a plan to CSRC in late 2018 seeking to set up a securities unit with registered capital of 100 billion yuan ($14.1bn / Dh51.9bn), Caixin reported. In contrast, Chinese brokerage giant Citic Securities has registered capital of 13bn yuan.

ICBC declined to comment. CSRC didn't return an emailed request for comment.

Regulators' desire to break the wall between commercial and investment banking was fuelled by mounting competition from foreign players, according to Caixin.

China scrapped foreign ownership caps in the brokerage business earlier this year as part of its efforts to fully open its $40 trillion (Dh146.9tn) financial industry. Global investment banks including Morgan Stanley, Goldman Sachs and Credit Suisse have won regulatory approval for majority stakes in their Chinese ventures.

Currently, investment banking is off-limits to most Chinese banks, though Bank of China and China Development Bank control brokerage businesses onshore under special arrangements by the government.

In addition, many Chinese banks, including ICBC, China Construction Bank and Bank of Communications, operate investment banking through their Hong Kong subsidiaries.

Updated: June 28, 2020 03:23 PM

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