Tencent's private bank to open soon

First of a group of firms to start banking operations

Internet giant Tencent Holdings will be the first among a batch of private companies to start its banking business soon after getting approval from the banking regulator, which analysts said Sunday will help finance the country's cash-starved small businesses.

China Banking Regulatory Commission (CBRC), the country's top banking regulator, said in a statement on Friday that it has granted approval to Tencent, China's largest Internet company by market value, to start its banking operations.

WeBank, founded by Tencent, Shenzhen Baiyeyuan Investment Co and Shenzhen Liye Group, is the first one among five private banks that had been approved by the CBRC in the second half of 2014 to open its door to clients.

Financial news portal caixin.com reported on Friday that WeBank would start its operations on December 28.

WeBank, with a registered capital of 3 billion yuan ($490 million), has a business scope that includes personal banking, corporate banking and international banking.

WeBank would focus on serving individuals as well as small and medium-sized enterprises with innovative financial products based on its social networking platform WeChat, Xu Hongcai, director of the Department of Information under the China Center for International Economic Exchanges, a Beijing-based think tank, told the Global Times on Sunday.

Tencent, the operator of -China's most popular instant messaging app WeChat with over 468 million monthly active users by the end of September, has advantages in online payment, experts said.

Given the firm's large number of users, WeBank is expected to abandon the traditional way of accepting money deposits by setting up branches, Xu said.

The country's cash-starved small businesses, which find it hard to get loans from existing commercial banks, could enjoy more flexible online financial services offered by banks such as WeBank, he noted.

Analysts expect that following the launch of Tencent's bank, reforms in China's banking industry will be accelerated in 2015 to promote the process of opening China's banking sector to private capital.

On November 30, the Legislative Affairs Office of China's State Council issued draft regulations containing 23 articles on the standardized deposit insurance system to solicit public opinions.

Yin Zhongli, a researcher at the Chinese Academy of Social Sciences, told the Global Times on Sunday the deposit insurance system will be established in China for the first time starting in 2015 to guarantee the safety of private bank deposits and set up a bankruptcy mechanism for commercial banks.

In addition, ramped-up reforms in the finance sector that involve interest rate liberalization will also be improved next year to support the development of private banks, Guo Tianyong, a finance professor at the Central University of Finance and Economics, told the Global Times on Sunday.