Private Banks with Private Investment to be Established Under Trial Basis

Private Banks with Private Investment to be Established Under Trial BasisChina has finally allowed private banks and other financial institutions that are being funded by private investment to be established under a trial basis. This announcement came after the government and the State Council finally formulated policies that will support economic restructuring, upgrading and transformation.

The China Banking Regulatory Commission is asking provincial governments to create plans for the establishment of these private banks so they can submit to the commission. Experts are saying that a proposal was made that suggested that banks should provide a minimum deposit f 500,000 which could protect its members of the general public from high risks, but might discourage private enterprises from opening banks. Also the importance of creating an insurance system for deposits is pushed to help create fair and competitive environment for these financial institutions.

Financial experts also suggested that the government should look into adopting several principles in developing private banks based on ownership. Private investment should hold controlling interest in banks based on management these banks will build internal power structures and operate independently and will assume the full responsibility of the profits and its losses.

Even when China Banking Regulatory Commission is still to release detailed regulations for these private banks, a anonymous local government has already provided the commission a drafted document for the supervision of the pilot private banks and based on the draft, private banks founders should provide at least 500 million yuan to a billion yuan as registered capital and shareholder numbers must not exceed twenty.

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