First private bank plan sent to State

The first local supervisory measures for private banks have been submitted to China's banking regulator, media reports said over the weekend, indicating a further step toward the setting up of banks by private firms and investors.

The local version is being used by the China Banking Regulatory Commission (CBRC) as a reference to formulate the national version, Economy & Nation Weekly reported, without specifying which place drafted the measures.

The measures require each private bank to provide an initial capital of 500 million yuan ($81.7 million) to 1 billion yuan for registration and to increase their capital later, the report said.

All initiators of private banks must use their own capital without using borrowed funds or entrusted funds. The major initiator must have been profitable for the latest three consecutive years and other initiators must have been profitable for the latest two consecutive years, according to the report.

The news came as the State Council released a plan in August to promote the setting up of private banks. Many companies have shown great interest in this.

Three companies in South China's Guangdong Province, including Shenzhen-based Internet company Tencent Holdings Ltd, have submitted applications to the CBRC, Nandu Daily reported Friday.

Tencent refused to comment when reached by the Global Times by press time.

Suning Commerce Group Co's application for the name "Suning Bank Co" has been approved Thursday by the Enterprise Registration Bureau of State Administration for Industry & Commerce.

As the national guideline for private banks has yet to be issued, companies cannot make formal applications, but many companies are undertaking active preparation and hope to be among the first, Zhou Dewen, president of the Wenzhou Council for the Promotion of Small and Medium-sized Enterprises, told the Global Times Sunday.

"For private banks, we need regional instead of national ones, and small-scale rather than large and medium-sized ones to support small businesses," Zhou said, noting that the initial capital can be reduced to 10 million to 100 million yuan for such private banks.

The banking regulator can set a lower standard for private banks, as they do not belong to systematically important financial institutions, Luo Yuding, a financial professor at the Shanghai University of Finance and Economics, told the Global Times Sunday.

However, companies with high debt-to-equity ratio and those with bad credit records should be excluded from being private banks, Luo said, believing that companies with sound financial performance are more likely to get approval.

According to the report, one to three private banks, selected from applicants in Beijing, Wenzhou and Shenzhen, are likely to get approved from November to January, and the first one will open before March.

Two to three pilot private banks are expected to get regulatory approval in the second half of the year, Zhou said.

Luo believed that the introduction of private banks will boost competition in the banking industry so as to improve banking services and reduce service rates.