China to allow individuals to establish rural commercial banks

Comes as China eases control over private capital in banking.

A draft document from the China Banking Regulatory Commission said China plans to allow individuals to establish rural commercial banks. The minimum registered capital for rural commercial banks is US$8.2 million.

Qualified originators include natural persons or individuals, domestic non-financial institutes and domestic and overseas banks using internal capital. The largest shareholder's stake should be at least 15% of the total equity compared to 20% at present.

Board members must have over five years’ experience in law, economics, finance or other sectors that will qualify them to carry out their responsibilities, said the CBRC draft.

The draft also imposes tighter restrictions on overseas originators or investors and adds two conditions. One is that their most recent year-end asset total must be at least RMB10 billion. The second is that the capital adequacy ratio of commercial banks shall be higher than the average level in the region where they are registered and not lower than 10.5%.

Individual foreign banks will hold less than 20% of the equity in rural commercial banks while multiple overseas banks' shares must not exceed 25%.

Apart from commercial banks, individuals will also be able to set up rural credit cooperatives, county-level banks or small lending associations.