Guotai joins PBOC payment system

Guotai Junan Securities, one of China's major securities brokers, has become the first firm allowed to join the central bank's payment system on a trial basis.

The move is expected to heat up the pressure on banks, market analysts said Thursday.

The People's Bank of China (PBOC). the country's central bank, has given the green light to China's third largest ­broker to join the bank's payment system, which means Guotai Junan can now conduct business previously limited only to banks, including money transfers, savings, and selling wealth management products, Caixin magazine reported Wednesday, citing unnamed sources.

Global Times' inquiries to the PBOC went unanswered by press time Thursday. Guotai ­Junan was also not immediately available on Thursday to confirm the news.

This will give Guotai Junan an advantage over other ­securities brokers, Yin Zhongyu, general manager of the M&A Department of Great Wall Securities, told the Global Times on Thursday.

Yin said many securities brokers have heard the news.

"The securities brokerage firms have grown much slower (than banks) over recent years," he said, noting that this measure aims to boost the development of securities brokers and add pressure on banks.

This pilot program is ­expected to activate the money sleeping in brokers' accounts and improve the productivity of money usage, which is ­consistent with the central ­government's intentions to make better use of existing funds in the market, Liu Xiao, a financial consultant at Beijing Anbound Consulting, told the Global Times on Thursday.

Customers will be able to transfer and wire securities investment funds directly with the broker instead of through custodian banks, Liu said, and it will also save the fees previously paid to the custodian for the service.

But the impact on banks will not be dramatic, as it targets a specific group of retail ­investors in the securities market, he said. The largest part of revenues still comes from commissions and proprietary trading, Liu noted.

If the pilot program proves successful, more stock brokerage firms are expected to be granted similar permission, he said.

As of the end of June, the total assets of China's 114 ­securities brokerage firms is 1.87 trillion yuan ($305 billion). far behind insurers, which have total assets of 7.88 trillion yuan, trust companies with assets of 9.45 trillion yuan, and banks with total assets of a gigantic 144 trillion yuan.

But banks previously used to making easy money through fixed interest margins ­nowadays face rising competition from increasingly market driven interest rates, an outflow of deposits as customers ­pursue higher returns from other investment channels, and the looming threat of Internet financing.