China's major financial institutions and conglomerates are pushing
for changes in existing regulatory framework in the financial
sector. The institutions want to wipe out barriers separating
sectors of banking, securities, insurance and trust.
The companies' ultimate goal is to win approval for cross-investing
between the sectors and have "financial holding companies," which
control their investments in different financial sectors,
established.
"We suggest financial authorities allow financial institutions to
invest among themselves," said Jiang Jianqing, president of the Industrial and
Commercial Bank of China.
The China
International Trust and Investment Corp (CITIC) has submitted
an application to set up its financial holding company and is
awaiting approval, said Ling Xiaodong, deputy director-general of
CITIC Research International.
Many brokerages, such as the Shanghai-based Haitong Securities, and
some non-state conglomerates, have also expressed a strong interest
to jump onto the bandwagon, media reports said.
Financial authorities have not made any comments on the suggestions
since they resurfaced since the beginning of this year, although
until last year they repeatedly said proposals of this kind would
not go ahead.
The very idea of connecting the different financial sectors through
investments used to sound heretic in light of the Commercial Bank
Law stipulation that prohibits banks' involvement in financial
services other than banking.
But the argument that domestic firms need to diversify investments
to compete with foreign rivals after its accession to the World
Trade Organization justified the re-emergence of the bold
proposal.
"We suggest that the Commercial Bank Law be amended," Jiang
said.
In
fact, lines between the sectors were blurred before the commercial
bank law was promulgated in 1995. Trust and investment companies
were the biggest beneficiaries of the regulatory ambiguity in those
years because they were literally conducting everything from credit
business, securities underwriting and trust and investment.
It
was exactly these investment and trust companies' poor management
and their hefty losses that made the central bank determined to
seriously pursue compartmentalization.
However, two heavyweight companies that are under the direct
supervision of the State Council - CITIC and the China Everbright
Group - were permitted to retain their stakes in different
financial sectors even after officials decided to cut off the
sectors from one another. Both CITIC and Everbright have industrial
operations, equity shares in or own banks and securities
companies.
"Although we have been allowed to operate the financial
institutions legally, we still need to apply for the license (for
the financial holding company) to mark the official start of the
company that holds them," CITIC's Ling said.
Other big players that have made multi-sector investments, but were
slow in severing them from one another, the Shenzhen-based Ping An
Insurance Company of China being an example, were also said to have
a good chance in winning a financial holding company license.
(China
Daily December 19, 2001)