What’s New: China is moving to offer brokerage licenses to commercial banks in a renewed effort to expand banks’ business reach and empower domestic players to compete with global rivals.
Caixin learned from sources that the China Securities Regulatory Commission (CSRC) may select at least two major commercial banks to test setting up brokerage businesses. The move followed securities regulators’ call since last year to create “aircraft carrier-size” brokerages as the country further opens up its financial market.
Background: Chinese regulators in 2015 discussed allowing commercial banks to run brokerage businesses, but the plan was blocked by regulatory hurdles and shelved after the stock market meltdown that year.
In late 2018, the Industrial and Commercial Bank of China (ICBC), the country’s largest lender, submitted a plan to the CSRC for a pilot program to establish a brokerage subsidiary running a full range of investment banking and securities brokerage services. ICBC proposed 100 billion yuan ($14 billion) of registered capital for the planned unit, which would dwarf all existing brokerages in China, Caixin learned from sources close to the matter.
According to ICBC’s projection, the new brokerage unit would record 15 billion yuan of net profit on 40 billion yuan of revenue in its first year of operation. The plan was reviewed by different ministries and received positive feedback from top regulators, though they called for prudency, Caixin learned.
Over the years, Chinese banks have tapped into the brokerage business indirectly, mainly by setting up majority-owned subsidiaries in Hong Kong.
Contact reporter Han Wei (weihan@caixin.com) and editor Bob Simison (bobsimison@caixin.com)
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