New post-notification requirement for shareholders of PRC commercial banks
In January 2018, the China Banking Regulatory Commission (CBRC) issued Interim Measures for the Equity Management of Commercial Banks which require that any investor (together with its persons acting in concert) holding 1% or more of equity interests of a PRC commercial bank is subject to a post-notification requirement due within 10 working days.
This post-notification requirement applies to both investors holding equity and listed shares (including A shares and H shares). Consequently, it applies to all QFIIs, RQFIIs, investors investing in A shares through the Stock Connect regime, and investors investing simply in H shares issued by PRC commercial banks.
Under the prevailing PRC and HK disclosure of interest rules, investors are generally only required to monitor shareholding once a 5% threshold has been reached. Investors should examine their positions to check if their holdings (together with the holdings of their persons acting in concert) in a PRC commercial bank have reached 1%, and determine if a notification to the CBRC (now the China Banking and Insurance Regulatory Commission) should be made. Deacons can draft and assist with notification reports.
Merger of China’s banking and insurance regulators
On 8 April 2018, the CBRC and the China Insurance Regulatory Commission (CIRC) officially merged into a new regulator, the China Banking and Insurance Regulatory Commission (CBIRC). The merger follows the State Council Institutional Reform Plan issued in March this year which was passed by the 13th National People’s Congress.
The CBIRC’s responsibilities primarily consist of supervising the establishment and ongoing business activities of banking and insurance institutions, and taking enforcement actions against violators. However, the power to adopt major regulations and rules will be reserved by the People’s Bank of China.
The creation of the CBIRC should help streamline supervision of various types of financial institutions in the PRC.
China to relax foreign shareholding limits in in securities companies
Further to our newsletter article of December 2017 on China to relax foreign shareholding limits in financial services sectors, from 9 March 2018 until 8 April 2018, the China Securities Regulatory Commission (CSRC) engaged in a public consultation on the Draft Administrative Measures for Foreign-invested Securities Companies (Draft).
The Draft proposes that foreign investors’ equity ownership in PRC securities companies shall be subject to a cap, which is initially proposed to be set at 51% but is to be increased over time with the pledge that such cap shall be removed after three years.
The Draft, once adopted, will allow foreign investors to be majority shareholders in PRC securities companies.