(ECNS) -- Insiders said China may set the minimum registered capital for establishing a private bank at 2 billion yuan ($302 million), in the context of pressing challenges faced by the banking industry, Beijing Youth Daily reported.
The China Banking Regulatory Commission (CBRC) approved five privately owned banks in China in the first trial, with the first, Wenzhou Minshang Bank, starting business in March 2015.
Now the regulator has given the go-ahead to at least three banks in the second trial. SANY Heavy Industry said on Aug. 1 that it had won CBRC approval to plan its bank. In addition, Pingtan City in East China's Fujian Province also plans to host a new private bank, the first one in the province, although it has not won approval yet.
Private banks have been mushrooming in China as a result of the country's ongoing financial reforms. At least 19 private banks are still in the process of planning, mainly involving the support of 30 listed companies, according to the report.
There are also companies withdrawing from their bank plans too. Guiyang Longmaster Information and Technology, and GuizhouYibai Pharmaceutical, announced they would not be the principal sponsors of a planned bank, because the CBRC has required the registered capital to be at least 2 billion yuan.
Insiders said the CBRC has raised the threshold to establish private banks since last year. The requirements include that enterprises must have made consecutive profits in the last three accounting years, with net assets taking up more than 30 percent of total assets after year-end bonus distributions, and outstanding balances of equity investments not exceeding 50 percent of net assets.
CBRC didn't make clear the registered capital requirements for establishing private banks at that time. But in November last year, north China's Shaanxi Province demanded the minimum amount to be 2 billion yuan, fueling speculation that it would become mandatory nationwide.
Furthermore, the lackluster performance of current private banks, as well as declining profits in the banking sector, has thrown cold water on the business too.
Wen Bin, principal researcher at China Minsheng Banking Corp, said new private banks must pay high attention to the challenges faced by the banking sector, including the economic slowdown, rising credit risks of companies, influences of interest rate liberalization, and the registered capital requirement.
