China Improves Supervision of Rural Banks

The Chinese banking regulator has revised the rules for the operation of rural financial institutions in order to step up supervision of small and medium-sized rural banks.

The draft document was published Wednesday by the China Banking Regulatory Commission (CBRC) on the website of the Legislative Affairs Office of the State Council to solicit opinions, which should be submitted before Nov 9.

The document aims to regulate rural financial institutions based on relevant laws and regulations, said a statement from the commission.

The draft specifies conditions for establishing rural banks, stating that shareholders who are natural persons should not buy shares amounting to more than 2 percent of the rural bank's capital stock.

Shareholders who are employees of the bank should not buy shares amounting to more than 20 percent of the bank's capital stock, it said.

Shareholders who are domestic non-financial institutions cannot buy shares exceeding 10 percent of the bank's stock, it added, excluding mergers or restructuring of high-risk rural credit cooperatives.

Overseas banks intending to invest in the Chinese mainland's rural banks should first submit applications to the CBRC, which will adjust criteria for overseas investors based on the Chinese financial sector's risk profile, the draft said.

It also stipulated detailed rules for stock rights change and qualifications for senior executives of rural banks.