Barriers for finance services set to ease
Print Edition
The Chinese securities regulator’s recent comments it was studying allowing commercial banks to apply for securities brokerage licenses signal that barriers for financial services were being further eased.
The China Securities Regulatory Commission is working to allow banks to conduct brokerage business although no timetable has been set, Zhang Xiaojun, a CSRC spokesperson said at a press briefing on Friday.
Rumors that the CSRC is moving to loosen curbs on the brokerage business have been circulating since last month. The Industrial Bank is reportedly waiting for approval from the State Council, or Cabinet, to acquire Huafu Securities while the Bank of Communications is said to be buying a 33.3 percent stake in Huaying Securities from the Royal Bank of Scotland.
These developments propelled mainland-listed banking stocks to surge nearly 5 percent on Monday and weighed on shares of listed brokers.
Broker licenses would be more appealing to small banks, analysts say, as the potential profits stemming from brokering would mean a sizable markup from banking alone.
But large, state-owned banks would have less enthusiasm to apply for the licenses as the profit generated by leading brokerages in the country accounts for under one-tenth of their earnings.
The Securities Law mandates that securities, banking, trust and insurance should be operated and regulated separately. The Commercial Banking Law also prohibits commercial banks from undertaking trust and broker business.
However, the lines between the these disparate businesses have becoming increasingly blurred in recent years.
Though banks are banned from wading into securities realm, some financial conglomerates have managed to run multiple services by setting up separate entities.
Such conglomerates including CITIC Group Corp, Ping An Insurance (Group) and China Everbright Group already have subsidiaries that hold licenses for banking, securities brokerage and insurance. Other financial institutions have also sought to extend their business offerings through buying stakes in, or acquisition of, firms with different licenses.
Yet analysts say these conglomerates, though boasting multiple licenses, seldom excel on all fronts. Ping An has a strong presence in insurance, but its bank is only one-tenth of the country’s largest lender, the Industrial and Commercial Bank of China, by total assets.
Sun Lijian, a senior finance researcher with Fudan University, said letting banks run a whole gamut of services would enable businesses to have their various needs met at one place.
But others raised concern over regulators’ ability to monitor behavior and control risks once banking service and brokerage are managed under the same roof.
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