November 16, 2017 / 8:59 AM / a year ago

China's banking regulator plans to tighten shareholder rules

BEIJING/SHANGHAI, Nov 16 (Reuters) - China's banking regulator on Thursday published draft rules that increase scrutiny over the relationship between commercial lenders and their shareholders, the latest in a slew of measures taken by Beijing to bolster supervision of its financial system.

The provisional regulations, which the China Banking Regulatory Commission (CBRC) published on its official website, require any investor or investors wishing to hold shareholding of more than 5 percent in a commercial lender for the first time to apply with the regulator.

The rules also outline loan concentration restrictions to major shareholders, actual controlling parties, and related parties. Commercial banks are also required to strengthen their examination of shareholder qualifications.

In recent months, Chinese regulators have introduced a series of new measures aimed at controlling risk and leverage in the financial system, with everything from lending practices to shadow banking under the microscope.

The move to more tightly regulate investment in the banking sector aims to reduce related-party transactions and uncompetitive business practices.

The new rules come amid a probe into the M&A deals of China's more acquisitive conglomerates, which has ensnared Anbang Insurance, a large shareholder of China Minsheng Banking Corp.

Earlier this year, CBRC told the country's banks to conduct "self-inspections" of their use of wealth management products and in other areas where loopholes may have been used to circumvent rules.

This week, the banking regulator also issued guidelines on risk controls for lenders, focusing on loans overdue for 90 days or more, and strengthening liquidity risk management. (Reporting By Matthew Miller in Beijing and Engen Tham in Shanghai; Editing by Sam Holmes)

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