China’s top banking regulator has urged national joint-stock commercial banks to rectify their unlicensed for-profit financial businesses outside the cities where they are headquartered, in a bid to curb financial risks stemming from rampant expansion, reported Caixin.
The China Banking and Insurance Regulatory Commission (CBIRC) issued a notice reminding the country’s 12 national joint-stock commercial banks that they must rectify these unlicensed businesses. The banks’ non-local departments operating the businesses are required to close or merge with the banks’ branches if they cannot obtain the necessary licenses.
This is not the first time they have been told to do so. In December 2018, the CBIRC released a guideline giving banks one year to rectify such unregulated businesses. The latest notice came as some national joint-stock commercial banks didn’t comply within the deadline, said Caixin sources. The latest notice said banks must properly defuse risks associated with these unlicensed businesses and properly handle personnel issues during the rectification, one source said.
In China, licensed financial institutions, including branches and subsidiaries of commercial banks, are only allowed to operate after they obtain approval proving they are qualified. But in recent years, major commercial banks have skirted regulations by setting up non-local departments or offices without approval.