Recruiting in China

Beijing, Oct 17: Around 5.7 billion US dollars in insurance capital could flood into China's banking sector this year after the nation's insurance watchdog unveiled a package of investment rules.

According to detailed rules issued by the China Insurance Regulatory Commission (Circ) for insurers' equity investment in banks yesterday, insurance institutions could invest no more than three per cent of their total assets in state-owned commercial banks, joint-stock commercial banks and city commercial banks.

By the end of last year, the total assets of China's insurance sector had reached 1.5 trillion yuan (190 billion US dollars), implying that 45 billion yuan (5.7 billion dollars) in insurance capital could be poured into China's banking sector this year.

"Equity investment in banks is just the first step, and we are considering regulations on investment in fixed-assets projects and state-owned enterprises," a Circ official was quoted as saying by China daily.

In guidelines published in late June, the regulator expressed its support for insurers' investment in banks, part of its efforts to boost insurers' investment returns.

"We support insurance companies buying into, or even taking controlling stakes in, well-managed, profitable banks that have a strong customer base," Circ Chairman Wu Dingfu said earlier.

The regulation stipulated that insurers could use their registered capital and provisions over 10 years for the investment.

In terms of purpose and scale, insurers' investment in banks is divided into two types general and grand investment.

Those accounting for less than a five per cent stake in a bank are classified as general investment, while those greater than five per cent are regarded as grand investment. There are no upper ceilings for the investment.

If an insurer plans to make a grand investment, its total assets by the end of last year should be no less than 100 billion yuan (12.7 billion US dollars).

For any investment taking a 10 per cent stake or above, the insurer should have total assets in excess of 150 billion yuan (19 billion US dollars) by the end of last year.

Meanwhile, those target banks for general investment will have to meet a capital adequacy ratio of up to eight per cent, a non-performing loans ratio lower than five per cent and a return on net assets of up to 12 per cent.

In fact, China's largest life insurers have been quite investors in banks.

In late July, Ping An Insurance (Group) company became the controlling shareholder in Shenzhen city commercial bank after it bought an 89.24 per cent stake in the lender for 4.9 billion yuan (620 million dollars).

Ping An has also been in talks with Beijing-based China Everbright Bank. Sources said the discussions are at a very early stage and it is uncertain whether they will result in an agreement.

Bureau Report