Bank applications hint at conflicts

China's banking regulator approved plans Friday to establish three privately owned banks, including one backed by local IT giant Tencent, marking a major step toward liberalizing the State-dominated banking industry.

According to local reports in March, five groups had filed applications to establish new privately held banking institutions. Within this group were the three banks approved last week. Meanwhile, an application filed jointly by e-commerce titan Alibaba and Wanxiang Group, a manufacturing conglomerate, did not secure approval. Similar plans from Fosun, a Shanghai-based capital management group, and Juneyao, a conglomerate involved in China's aviation industry, saw the same outcome.

Some say that Alibaba and Fosun were less concerned about profiting from their proposed banks and more interested in enhancing ties within China's small business community. It has also been said that Wanxiang and Juneyao may have had vested interests in funding certain industries over others, potentially creating conflicts with the wider aims of Alibaba and Fosun. Regulators should keep these speculations in mind and look for mismatches when considering private banking applications.