China is now allowing both domestic and foreign commercial banks
to establish financial leasing companies in the country, under a
rule released by its regulator yesterday.
The China Banking Regulatory Commission (CBRC) rule will permit
locally as well as overseas-incorporated commercial banks to
directly set up financial leasing companies in China from March
1.
This is the first such move by the regulator since 1997 when
commercial banks were required to withdraw from the sector.
However, it is stipulated that a bank can invest in financial
leasing companies only if its?capital adequacy ratio stands at
over 8 percent, has total assets of over 80 billion yuan per annum,
and has been registering profits for two consecutive fiscal
years.
The rule also allows large-scale leasing companies,
manufacturing enterprises and other financial institutions to
invest in the business pending CBRC approval.
The minimum registered capital for a financial leasing company
is also lowered to 100 million yuan down from the previous 500
million yuan.
"The CBRC rule is aimed at rectifying the 12 financial leasing
companies and canceling?the franchise rights of financing and
inter-bank borrowing and lending to make them return to the main
business and financing and leasing sector," said an anonymous
analyst with the Financial Leasing Professional Committee at the
Society of Finance.
China currently has 12 licensed financial leasing companies but
the new rule may well catapult commercial banks to the industry's
new preferred choice for investors.
"There will be a big reshuffle among the financial leasing
companies, and commercial banks will become almost the main
investors in the industry," the analyst said.
The rule is also seen as the implementation of one of China's
banking commitments to the World Trade Organization.
China opened up its banking industry at the end of 2006.
Foreign-funded banks have been able to deal in the renminbi retail
business across the country since December 11.
"The old financial leasing rule was no longer in line with the
opening banking industry. The new circumstances prompted the CBRC
to revise the rule and it got primary approval from the State
Council," the regulator said in a statement on its website.
The CBRC yesterday further released its revised rule on China's
trust corporations, which aim to stimulate the industry and better
protect investors' interests.
(China Daily February 2, 2007)