The China Banking and Insurance Regulatory has urged national joint-stock commercial banks against operating unlicensed businesses – the second notice issued in six months.
CBIRC reminded China’s 12 national joint-stock commercial banks against operating unlicensed businesses in an effort to curb risks associated with rapid expansion beyond regulatory oversight. This specifically refers to unlicensed businesses opened by banks outside of their headquarter city.
Mainland China’s top watchdog said that such businesses are either required to close or merge with the banks’ branches if they are unable to obtain the necessary licenses.
Widespread Practice
In recent years, banks have been skirting regulations to expand by setting up non-local departments or offices without approval. Shenzhen-based China Merchants Bank, Guangzhou-based China Guanfa Bank and Fuzhou-based Industrial Bank all operate unlicensed investment banking divisions in the financial hubs of Beijing and Shanghai in an effort to win more businesses and lure top talent.
The first such notice was issued in December 2018 and the current one comes as some banks have failed to comply within the deadline, according to a «Caixin» report, to requirements including the closure or merging of unlicensed businesses as well as handling of personnel issues.
It remains to be seen how many will opt for licensing and how many will simply retreat. 60 percent of unlicensed departments of Shenzhen-based Ping An Bank in Beijing or Shanghai will close or be merged, the report added citing unnamed sources.
