China‘s securities regulator plans to grant investment banking licences to commercial lenders as part of efforts to breed industry behemoths in the face of fiercer foreign competition, business magazine Caixin reported.
A pilot scheme could involve at least two of China‘s largest banks getting the green light from the China Securities Regulatory Commission (CSRC) to conduct investment banking business on the mainland, according to Caixin.
The Industrial and Commercial Bank of China, the country’s top lender, submitted a plan to CSRC in late 2018 seeking to set up a securities unit with registered capital of 100 billion yuan, Caixin reported.
In contrast, Chinese brokerage giant Citic Securities has registered capital of 13 billion yuan.
ICBC declined to comment.
CSRC said in a statement on Sunday that several approaches were under discussion to help the “high-quality” growth of China‘s investment banking industry, which is key to expanding direct financing in China. But “whichever approach the government takes, there would be no big impact on the industry landscape”, CSRC said in a statement on its website.
Regulators’ desire to break the wall between commercial and investment banking was fuelled by mounting competition from foreign players, according to Caixin.
China scrapped foreign ownership caps in the brokerage business earlier this year as part of efforts to fully open its $40 trillion (32.4 trillion pounds) financial industry. Global investment banks including Morgan Stanley, Goldman Sachs and Credit Suisse have won regulatory approval for majority stakes in their Chinese ventures.
Currently, investment banking is off-limits to most Chinese banks, though Bank of China and China Development Bank control brokerage businesses onshore under special arrangements by the government.
In addition, many Chinese banks, including ICBC, China Construction Bank (CCB) and Bank of Communications (BoCom), operate investment banking through their Hong Kong subsidiaries.