China Allows Banks to Buy Into Insurers-Regulator

BEIJING (Reuters) - China's financial regulators have formally agreed to allow banks to invest in insurance firms, removing one of the barriers between the two sectors.

The move, trailed by banking sources last week, would help to improve the overall competitiveness and risk management capacity of China's financial industry, the China Banking Regulatory Commission (CBRC) said in a statement on its Web site on Tuesday.

Under a memorandum of understanding that the CBRC signed with the China Insurance Regulatory Commission on Jan. 16, insurers are also permitted to buy into banks.

This merely formalises the existing state of affairs, as China Life Insurance Co (601628.SS)(2628.HK) and Ping An Insurance (Group) Co (601318.SS) (2318.HK) have already bought stakes in commercial banks.

The CBRC did not give any details of the agreement, leaving unclear the maximum equity stake that a bank may take in an insurance firm.

China keeps banks, insurers and securities firms separate, but the boundaries are blurring, requiring increased coordination among regulators.

According to the CBRC, 19 percent of insurance sold in the first nine months of 2007 was through banks.

(Reporting by Zhou Xin; Editing by Alan Wheatley)