China's banking regulator reiterated its support yesterday for commercial banks setting up fund management companies, responding to rumours that some plans are being shelved.

"Allowing commercial banks to set up fund management companies is an important measure to improve the comprehensive competitiveness of China's banking sector, which will help propel the healthy development of the capital market and deepen financial reforms," the China Banking Regulatory Commission (CBRC) said in a statement published on its website.

Banking, insurance and securities are separately regulated in China. But the authorities recently said commercial banks will soon be allowed to establish fund management businesses, therefore entering a business that is long seen as part of the securities industry.

The local media lavished coverage on the news, but some reports, the commission said, were untrue. Earlier this week, some media reports said the CBRC favoured commercial banks setting up wholly-owned fund management companies, and that it had shelved some banks' applications for failing to find strategic investors.

"Some media organizations published totally untrue reports on related issues, which is very unfavourable for commercial banks going about related work," the CBRC said.

The commission said it is working closely with the central People's Bank of China and the China Securities Regulatory Commission on related rules. It stressed efforts to prevent risks as commercial banks enter the fund management industry, insisting that the new fund management companies must be jointly invested by banks and other experienced institutional investors, both home and abroad, to ensure adequate management expertise and sound corporate governance.

The commission also said "firewalls" will be installed between the commercial banks' banking operations from their fund management business, to prevent irregularities.

"We believe that such measures will benefit the stable development of China's banking industry and capital markets, and help deepen the financial system's further reforms," the CBRC statement said.

Source: China Daily