What’s new: China’s central bank has given two state-owned firms the nod to become the country’s first two financial holding companies, 18 months after it released rules designed to tighten up oversight of nonfinancial conglomerates with multiple financial units.
Beijing Financial Holdings Group Ltd., and China Citic Financial Holdings Co. Ltd., a company being set up by Citic Corp. Ltd., have recently been granted approval to become financial holding companies, according to a Thursday statement issued by the People’s Bank of China (PBOC).
The central bank accepted Citic Corp.’s application in May and Beijing Financial Holdings Group’s in August.
“The establishment of financial holding companies is conducive to promoting the separation of financial and other business operations of a nonfinancial corporation, which can prevent cross contamination of risks,” the PBOC said in its statement.
The background: The regulations were released in September 2020 as part of efforts to step up oversight of nonfinancial conglomerates — including tech giants Ant Group Co. Ltd. and Tencent Holdings Ltd. — that had expanded into the finance industry, after a string of corporate scandals exposed the risks they posed to the financial system.
Under the rules, certain companies outside the industry that own financial institutions in at least two different sectors are required to set up, or turn themselves into, financial holding companies subject to supervision of financial regulators.
Related: Four Things to Know About the Sweeping Regulatory Changes Coming for Financial Holding Companies
Contact reporter Kelsey Cheng (kelseycheng@caixin.com) and editor Michael Bellart (michaelbellart@caixin.com)
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