China's largest banks may soon be allowed to establish their own private equity divisions, the South China Morning Post reported, citing comments by Cao Wenlian, the National Development and Reform Commission's (NDRC) vice-director of finance. "All the relevant agencies should consider allowing the three big banks (Bank of China, China Construction Bank and Industrial and Commercial Bank of China) to invest in private equity and venture capital now that they are allowed to establish asset management and insurance operations," he told the newspaper Thursday. China has long banned banks from investing in non-core businesses to keep risk from spilling over from one financial sector to another. In 1999, Bank of Communications was forced to sell its holdings in China Pacific Insurance and a year later its stake in Haitong Securities. Construction Bank had to part with its stake in China International Capital Corp, the mainland's most profitable securities broker, during a 2004 restructuring involving a massive capital injection by the government. Mainland authorities have since been loosening the restrictions, and the pace of change has been accelerating since last year as the deadline for China to fully open its market to foreign banks at the end of this year comes closer. Cao's comments, if translated into policy, mark a major step in this process.