* C.bank aims to fill 'blank' with rules on vast, complex firms
* Draft rules ban firms from engaging in non-financial business
* Rules aimed at conglomerates with above 500 bln yuan in assets (Adds details, quotes, background)
BEIJING, July 26 (Reuters) - China's central bank on Friday unveiled the first draft rules to regulate the country's vast and often complex financial holding companies, which it said have had "blind business expansion" in recent years. The draft rules set minimum asset requirements and ban the holding companies from involvement in non-financial business activities. "There's a blank in the regulation of the sector, and the risks are accumulating and become exposed," the People's Bank of China said in a statement. "Financial holding firms, especially those formed by non-financial companies, witness a blind business expansion over the past few years," it added.
The opaque cross-holding structures and "blind" expansion of financial holding companies have alarmed policymakers, who say the control of multiple financial institutions by conglomerates and their ability to do business across different sectors could pose wider, systemic risks.
China has been working towards specific rules regulating financial holding companies since last year.
In a the central bank's 2018 financial stability report released in November, there was a chapter describing the status of Chinese financial conglomerates and naming some, including HNA Group, Fosun International , China Evergrande Group, Ant Financial Services Group , Tencent Holdings and JD.com.
According to the draft regulations, financial holding conglomerates with at least 500 billion yuan ($72.69 billion) in assets or have non-bank affiliates that manage 100 billion yuan of financial assets or more will be subject to the rules.
Financial holding firms cannot engage in any non-financial business in order to prevent cross-sector risks, the PBOC said, and it will be illegal for them to inject capital into financial institutions.
To rescue troubled entities affiliated with financial holding firms, the central bank can order the conglomerates to inject capital or transfer their stakes to a third party, the central bank said.
The regulations, which tighten market access for financial conglomerates, are a key measure to contain the country's financial risks "right at the start," according to the PBOC.
Last year, the PBOC put five financial holding companies, including fintech giant Ant Financial, retail conglomerate Suning.com and state-owned China Merchants Group, in a pilot scheme to test their ability to manage risks.
The central bank will seek public comment for the regulations until Aug. 24, and said it would set up a grace period for implementing the rules.
$1 = 6.8785 Chinese yuan Reporting by Beijing Monitoring Desk, Cheng Leng and Ryan Woo; Writing by Se Young Lee; Editing by Richard Borsuk