The CBRC recently released a draft, which requires 20% stake holding by a single foreign investor and 25% for the collective stake of all foreign investors in one Chinese bank.
While tightening the regulatory noose, the market regulators have tried to facilitate easy regulations for local financial institutions.
The CBRC has requested people to give their opinion and comment for the proposed draft rules, which is open until 9 September and a final rule will be subsequently published within a month.
As per the new requirements on capital adequacy, the foreign financial institutions must maintain the regulatory capital level set by their home country governments and it should not be less than 10.5%, against the current requirement of 8.5%.
During the 2004-08, overseas financial organizations set up their banking businesses in the country leveraging the Chinese government’s attractive foreign investment policies. Later, the institutions booked huge profits by divesting their businesses.
The profit booking forced the Chinese regulators to come up with more stringent foreign capital investment rules for the banking sector, despite the increasing demand of relaxing the rules for the same.
