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Four biggest banks may get nod for insurance units on trial basis

CHINA is reportedly planning to allow the nation's four largest banks to establish insurance units on a trial basis to help banks diversify their businesses to boost revenue.

The China Insurance Regulatory Commission and the China Banking Regulatory Commission have reached an agreement on the issue, the China Securities Journal reported yesterday, citing Lai Xiufu, a senior CBRC official.

The report didn't say when the trial program will start. The four biggest Chinese banks are Industrial and Commercial Bank of China, Bank of China, China Construction Bank and Agricultural Bank of China.

The CIRC and CBRC declined to comment yesterday. Officials at the four banks were either not available to comment or said they could not comment.

China has been urging banks to develop themselves into financial conglomerates by tapping other businesses including asset management, trust and securities. The top four lenders have already set up fund ventures with foreign partners.

"Allowing banks to enter the insurance business will help them expand their revenue channels," said Zhang Wei, an investment consultant at China Galaxy Securities. "But lenders may have to seek professional partners for the insurance units to ensure their business models are sound and risks are contained."

The CIRC has also given a preliminary nod to Bank of Communications and Bank of Beijing to take stakes in domestic insurers, media reports said last week.

China's State Council is set to study laws this year to legalize banking operations by the private sector, the newspaper said yesterday, citing Liu Ping, vice head of research at the People's Bank of China.

The CBRC has said proposals to allow individuals, non-financial enterprises and industry associations to start lending businesses to develop a multi-layer credit market are being studied.


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