What’s new: China’s central bank will include newly approved financial holding companies (FHCs) in its macroprudential management framework to better manage risks in the financial system, a senior official said.
The central bank is reviewing three companies’ applications to operate as FHCs, said Li Bin, head of the Macroprudential Policy Bureau of the People’s Bank of China. The bank approved the first two FHCs in March.
The entry criteria for FHCs will focus on the size of financial assets controlled by companies, the qualifications of major shareholders, the transparency of shareholding structure and corporate governance, Li said.
The central bank will promote qualified companies to set up FHCs in a bid to monitor and control financial risks, Li said.
The background: In March, Beijing Financial Holdings Group Ltd. and China Citic Financial Holdings Co. Ltd., a company to be set up by Citic Corp. Ltd., were authorized by the central bank to become FHCs.
The approvals were the first since the central bank released rules in September 2020 to govern nonfinancial conglomerates with multiple financial units as part of efforts to step up oversight after a string of scandals involving conglomerates such as HNA Group Co. Ltd. and Tomorrow Holding Co. Ltd.
The central bank said at that time that it received applications from three other companies — China Everbright Group Ltd., China Merchants Finance Investment Holdings Co. Ltd. and China Wanxiang Holding Co. Ltd.
The FHCs set up by nonfinancial companies will need to be subject to similar rules and supervision as those for existing licensed financial institutions such as banks and insurers to ensure consistency of regulation and avoid regulatory arbitrage and unfair competition, Zeng Gang, a deputy director of the National Institution for Finance and Development, told Caixin in March.
Contact reporter Han Wei (weihan@caixin.com) and editor Bob Simison (bob.simison@caixin.com)
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