The mainland banking regulator plans to extend the lock-up period for shares held by foreign strategic investors in domestic lenders to five years from three years in an effort to reduce risk. China Banking Regulatory Commission chairman Liu Mingkang said in a China Securities Journal report that the lock-up period must be at least five years in future to ensure the security of the country's banking system. Mr Liu (right) did not say when the new policy would take effect. Hit by the global financial crisis, a number of foreign institutions have recently sold stakes in mainland banks that they bought as strategic investors during initial public offerings in 2006 and 2007. Over the past four months, Bank of America Corp sold part of its stake in China Construction Bank Corp, while Royal Bank of Scotland Group and UBS sold their entire stakes in Bank of China. That put pressure on the lenders' mainland-listed shares, which in turn sparked concern about their operations and financial outlook. Some observers said foreign investors were given unfair preference in obtaining stakes before the listings and were taking quick profits as soon as lock-ups expired. Guo Tianyong, a professor with the Central University of Finance and Economics, said the regulator aimed to protect domestic lenders better and build a firewall against capital flight during financial turbulence. 'However, five years may be long enough to dampen the interest of potential investors,' Mr Guo said. Zhang Hua, an analyst with Celent, a United States-based financial consultancy, said: 'Obviously, a longer lock-up period means less liquidity. For investors, liquidity is very important, especially at this time.' However, the impact would be limited, given that many foreign financial institutions were financially capable of making investments in the near term, he said.