The Chinese government is expected to unveil regulations for financial holding groups in the first half of 2019, according to the central bank, the People's Bank of China (PBOC). The goal is to promote the healthy development of financial holding companies.
For this purpose, a pilot regulatory scheme has been launched covering five financial holding companies to gather experience, Mr Zhou Xuedong, director of the general office and head of the financial stability bureau of the PBOC has said, according to the Xinhua news agency.
The five are Ant Financial, China Merchants Group, Suning Commerce Group, Shanghai International Group and Beijing Financial Holdings Group. The financial businesses these groups engage in include insurance, banking, securities, trust, and fund management.
PBOC said that some non-financial enterprises have invested in holding several types of financial institutions through incorporation, mergers and acquisitions, and share purchases. However, some groups are “barbaric” in their growth, large in volume, complex in their business operations, high in related-party risks, and lack supervision.
Some non-financial enterprises have impure motives for investment. They have rapidly expanded into the financial industry through fake capital injections, leveraged funds and related transactions. At the same time, they control many types of financial institutions to form cross-sectoral, cross-industry, cross-regional and cross-border financial operations. Risks are constantly growing, the central bank added.
To contain systemic financial risks, the relevant authorities are establishing a supervisory system for financial holding companies to regulate their development and fill the regulatory gap. The central bank said that the regulation of the holding companies will adopt a combination of macro-prudential management and micro-prudential supervision.
The central bank also released its first financial institutions ratings in its “China Financial Stability Report 2018” report issued last Friday. Covering 4,327 financial institutions, the ratings divide the institutions into 10 categories, with 10 representing the riskiest.
The report also said that macro-economic and financial policies will be more forward-looking, flexible and coordinated in 2019, and the country will continue to promote financial reform and opening up.