Big stakes in lenders by insurers will need approval
Chinese insurers which want to buy more than 5 per cent of domestic banks will need regulatory approval, according to the chairman of the China Banking Regulatory Commission.
Speaking at a business symposium yesterday, Liu Mingkang said some insurance firms had applied to set up banking subsidiaries.
To qualify, they would have to meet certain benchmarks and needed to create a barrier between their banking and insurance operations, he said.
Ping An Insurance (Group) is the only insurer to have a banking division, Ping An Bank with two branches in Shanghai. HSBC holds a 20 per cent stake in the company.
Last Friday, the China Securities Regulatory Commission said that it would allow insurers to take stakes in listed or unlisted banks in an effort to promote co-operation between the banking and insurance sectors.
Mr Liu said the government would set no limit to the shares insurance firms could hold but, if it was more than 5 per cent of the bank's capital, they would need approval from the banking regulator.
Last week, the Securities Times reported that Ping An had signed an agreement with the Shenzhen city government to buy its 51.69 per cent holding in Shenzhen Commercial Bank at more than two yuan a share. Ping An declined to comment.
The logic of this cross-over is that the insurers are flush with money - 1.6 trillion yuan by the end of April - but short of instruments to invest in.
Yet, they also face long-term liabilities that may be larger than the low interest they receive from state treasury bonds and fixed bank deposits, which account for most of their assets.
For their part, banks welcome a large institutional investor that is likely to hold its stake for the long term.
Six Chinese insurers received approval to invest US$600 million in Bank of China's listing in Hong Kong.
Insurers can choose to buy shares from banks already listed, such as China Minsheng Banking Corp, China Merchants Bank and Huaxia Bank, and those preparing to list, such as Industrial Bank, Citic Bank and Nanjing Commercial Bank, which offer a potentially higher reward as their share prices are likely to rise after the listing.
Mr Liu said that Industrial and Commercial Bank of China's shares would list in October, if not earlier.
