China’s central bank issues draft rules on financial holding companies in move to rein in risk
- Firms with two types of financial business must apply for licence within six months of regulation taking effect and have US$726 million registered capital
- People’s Bank of China says ‘regulatory vacuum has led to risk accumulation and exposure’
China’s central bank on Friday released a draft regulation on financial holding companies, as it seeks to contain the potential spread of risk from their business to other sectors.
“There is a regulatory vacuum around some financial holding companies, especially those starting from non-financial businesses, which has led to risk accumulation and exposure,” the People’s Bank of China (PBOC) said in an online statement.
The draft rules, which will be finalised after feedback is received by late August, confirm the central bank’s regulatory responsibility and set entry thresholds for financial holding firms’ capital requirements, management qualification and risk parameters.
According to the draft, companies with two types of financial business – such as securities brokerage, banking, insurance, trusts, asset management and financial leasing – will have to apply for a financial holding company licence within six months of the new regulation taking effect, and they must have more than 5 billion yuan (US$726.7 million) in registered capital.
In addition, a financial holding company cannot also run a non-financial business, a move aimed at stopping the spread of risk to the real economy.