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September 18, 2005

China May Allow Higher Foreign Ownership of Banks

Our old friend Michelle Batchelor at Bloomberg news reports that China is getting ready to allow a higher foreign ownership limit for its domestic banks.

"We are working on a proposal how we can lift the cap," [China Bank Regulatory Commission Chairman Liu Mingkang] told reporters in Beijing on Monday. "We will have future changes and the door will be open much wider."

Current regulations permit 25% collective ownership by foreigners of a single institutions, with no single shareholder permitted to hold more than 19.9%.

However, there have been signals in the past that this limit might only apply to the more strategic national banks, with some of the more undercapitalized city commercial banks having supposedly been given permission to sell up to 80% stakes to foreigners in order to raise funds for NPL write-offs.

Expect no change, however, in the actual control over the big four state banks, which will remain at least 51% owned, and entirely controlled by, the central government.

Posted by The Banker at September 18, 2005 05:21 PM

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