March 11, 2014 (TSR) – In a pilot program to test the country’s preparedness for private capital in its banking sector, China will set up five private banks, the chief of the country’s banking regulator said on Tuesday.
The first batch of five banks will be in Tianjin, Shanghai, Zhejiang Province and Guangdong Province, according to Shang Fulin, head of the China Banking Regulatory Commission (CBRC).
The program is likely to be extended to more places, said Shang at a press conference on the sidelines of China’s annual parliamentary session.
In a move to further open up China’s banking sector, China’s key plenum of the ruling Communist Party meet last November had announced the setting up of private banks.
Ten Chinese private giants, including Internet firms Alibaba and Tencent, are among those who will participate in the process, said Shang on Tuesday.
He said their eligibility, as shareholders, will be subject to further examination.
Each of the banks will be co-sponsored by at least two private capital providers, he added.
No timeline for the launch of the banks was announced. According to a China Daily report, the banking sector was the most lucrative industry in the A-share market in China in the first half of 2013.
The new banks will be subject to the same regulation and supervision as existing commercial banks, according to the CBRC chief.
However, the financial services of private banks will be oriented towards small and micro businesses as well as residential communities, Shang said. Risk monitoring will be strengthened and shareholders’ behaviors will be regulated, he added.
Chinese banks top the list of the world’s most profitable banks now even as European banks’ profits have fallen over the years.
China’s four largest state-owned banks earn the most among the top 500 Chinese companies, according to an annual list released by Fortune in July 2013.