The interest of China's commercial banks in developing fund business and setting up fund companies have received positive response from the regulatory agencies and approval in principle from the State Council.

On September 15, the People's Bank of China convened heads of state-owned commercial banks for a meeting to discuss about the possibility of their fund business. The issue has been under consideration for long. Some banks have submitted formal or informal applications for the launch of the service.

There is no legal barriers blocking commercial banks from having their own fund companies. The Securities Investment Fund Law and Commercial Banks Law which were put into effect recently have laid a legal foundation for this practice.

According to the existing regulatory and legal framework, a "firewall" between the fund business and banking service in the commercial banks will be ready under the supervision and coordination of the People's Bank of China, China Banking Regulatory Commission and China Securities Regulatory Commission.

Fund companies set up by the commercial banks can issue various specialty funds, including money market fund, bond fund and equity fund.

Representatives from the commercial banks at the meeting widely agreed that a green light to commercial banks for fund business and fund companies would be in line with the State Council's document, the Guideline of Pushing Forward the Reform, Opening-up and Stable Development of Capital Market. They hold that the initiative would support the prospect of a permanently sound capital market, higher direct financing and smooth progress on reform of the state-owned commercial banks.

By People's Daily Online