(Yicai Global) May 25 -- Five of China's largest financial holding firms have participated in a secret pilot program from the central bank, which will provide certificates proving their financial health, as part of the country's increased efforts to curb massive risks generated by speculative investing among its conglomerates.
The list includes three state-owned financial giants such as the CITIC Group Corp., China Everbright Group, and China Merchants Group, a source close to the People's Bank of China told Yicai Global in an exclusive interview.
The two others are Ant Financial Services Group, which was carved out of Alibaba Group Holding Ltd. and is the operator of online payments service Alipay, as well as Suning Holdings Group Co., which runs major private electronics retailer Suning Commerce Group Co.
The pilot program has been ongoing for almost half a year, said the source, adding that its secrecy was due to its experimental nature. The new rules need approval from China's State Council and could be implemented across the board this year, reported China Daily.
China’s financial holding groups covering the banking, securities, trust investment and insurance sectors were threatening financial stability through their risk-taking and Beijing is in the early stages of making “some basic rules” to deal with the problem, South China Morning Post reported Zhou Xiaochuan, China’s former central bank governor as saying.
The core of the pilot lies in aspects including market access, corporate governance, capital adequacy and related party transactions. Currently, regulations on financial holding firms are subjected to the parent company. Thus, in cases of cross-sector business, there is a regulatory vacuum, causing problems such as double counting of capital, reported Asia Times.
To ensure China's financial stability, there are four important fields to work with, including the asset management industry, shadow banking, internet finance, and financial holding companies, said Zhou, speaking separately at the annual meeting of the International Monetary Fund and World Bank Group in October last year. The asset management regulations were tightened in April, and the remaining three of those fields were included in the government work report of this year.
Editors: Emmi Laine, William Clegg