Licenses for private banks coming soon

The first batch of three to five privately owned banks are expected to win licenses around the period of the 12th National People's Congress and 12th National Committee of the Chinese People's Political Consultative Conference in early March, the China Securities Journal has reported.

So far, more than 100 proposed private banks have had their names approved by the State Administration for Industry and Commerce.

Four of those names were approved just after the Spring Festival, which ended in early February.

The China Banking Regulatory Commission has no confirmed schedule for issuing the licenses, according to Zhang Bocheng, an official in the agency's public relations office.

"We haven't received any further instructions on when and how to issue licenses for privately owned banks," said Zhang.

Zhang added that the first licenses probably won't be awarded before the opening of the "two sessions", which start in the first week of March.

During a CBRC videoconference last month, participants were told that initial regulations covering private-sector banks will be a focus of the agency's work this year.

Initially, it will issue restricted licenses to qualified private capital holders who can demonstrate strong supervisory and risk control abilities.

These banks should be totally funded by private capital, with shareholders bearing the risks.

Three to five such banks will be launched under a trial program. Others will be approved on a case-by-case basis.

Private capital will also be encouraged to participate in the restructuring and reform of existing financial organizations.

"No detailed documents have been released by the central government on how private-sector banks will work, with what kind of financial services, so it is quite hard to tell how big the changes will be to the current system," said Jin Lin, a senior banking analyst with Shanghai-based Oriental Securities Co Ltd.

Jin added that there won't be any obvious effect on the operations of existing financial organizations, as the government won't allow the private banks to conduct all types of financial services.

Entrepreneurs in Wenzhou, Zhejiang province, have sought repeatedly over the past two or three years to launch private banks.

Several chambers of commerce submitted a draft plan for private banks to the city government in June 2012 and again a year later. Neither plan received a response.

"We are keen to help more small and medium-sized enterprises with temporary financial problems by raising money from successful large enterprises and overseas returned businessmen," said Jiang Yongzhong, head of the Wenzhou Chamber of Commerce branch in Jinhua, also in Zhejiang province and one of the initiators of the plan.

Lacking any detailed guidelines from regulators, it's very difficult for private-sector holders of capital to make further moves.

"Hopefully, the 'two sessions' will bring us goods news about allowing private capital to enter the banking sector, which will make our previous efforts worthwhile," said Jiang.