Central Bank Reaffirms Separation of Banking, Insurance, and Securities

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Last updated at: (Beijing Time) Wednesday, April 24, 2002

Central Bank Reaffirms Separation of Banking, Insurance, and Securities

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The People's Bank of China, the country's central bank, has turned down the appeal for removal of the wall between the banking, insurance and securities sectors Tuesday, reaffirming that the wall will remain there for now.

Commercial banks can be commissioned to sell securities and insurance policies for brokerages and insurance companies, but they will not be allowed to underwrite securities and insurance policies, the central bank said in a circular.

"When commercial banks are commissioned to distribute shares, bonds, dividends and interests or to buy or sell securities, they should serve only as intermediaries that earn commissions," the bank said.

Different opinions between banks and authorities

The isolation of the three arms of financial services is stipulated by Chinese laws. But as China joins the World Trade Organization, some commercial banks are arguing that they will be standing at a disadvantageous position when competing with foreign rivals unless their roles were expanded.

But the country's financial authorities are not moved, saying that financial industry is still not mature enough for the introduction of the so-called supermarket-like banking system, under which banks can offer almost all kinds of financial services.

The central bank's circular also said commercial banks are not allowed to engage in intermediary stock trading to avoid illegal fund flows from banks to the stock market.

The drain-off of state assets caused by State-owned companies' investment in stock markets has been a major concern for China's financial authorities in recent years.

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