March 4, 2013 / 11:55 AM / in 5 years

China city banks get go-ahead to be fund managers

BEIJING, March 4 (Reuters) - China has broadened a pilot test and given its approval to two mid-sized banks to start fund management arms, the bank regulator said on Monday, a boost for the country’s plans to deepen its financial markets.

The Industrial Bank Co Ltd and Bank of Beijing Co Ltd been given permission to become fund managers, China Banking Regulatory Commission said in a statement on its website.

The banks would be allowed to pick their own partners and were expected to set up “reasonable” equity structures, the regulator said, without elaborating.

Eight large Chinese banks already have joint fund management ventures with foreign investment banks under the pilot that started in 2005. Together they managed nearly 500 billion yuan ($80.3 billion) worth of assets, the regulator said.

“Expanding the pilot project will improve the structure of social financing and increase the proportion of direct financing,” Shang Fulin, chairman of the bank regulator, said in the statement.

China wants its banks to diversify revenues away from net interest income as it slowly liberalises its interest rate market by introducing more competition between lenders. It also hopes to increase financial services by cautiously encouraging more securitisation.

Chinese media had reported in January that three other city banks - Bank of Shanghai Co Ltd, Bank of Ningbo Co Ltd and Bank of Nanjing Co Ltd - were also set to get approvals to become fund managers although they were not mentioned in the regulator’s latest announcement.

Fund management joint ventures between big Chinese lenders and foreign banks include ICBC Credit Suisse Asset Management Co, CCB Principal Asset Management, Bank of China Investment Management and ABC-CA Fund Management. ($1 = 6.2 yuan) (Reporting By Xiaoyi Shao and Koh Gui Qing; Editing by Nick Macfie)

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