China reportedly plans to relax restrictions on the shareholding ratio of major investors in commercial banks

According to foreign reports, China is considering relaxing the “two participate, one control” equity regulation rules for commercial banks to broaden the financing channels for commercial banks impacted by economic slowdown and to assist the industry in replenishing core capital. However, relevant discussions are still in the preliminary stages and may see changes.

“Two participate, one control” refers to the interim measures for the management of commercial bank equity issued by the former Banking Regulatory Commission (National Financial Regulatory Administration) in 2018, which states that if a single investor holds 5% or more of a commercial bank’s shares, they are deemed a major shareholder and can participate in at most 2 commercial banks or only control 1 commercial bank.

For investment entities authorized by the State Council, banking financial institutions, and entities approved by regulators to restructure high-risk commercial banks, there are no restrictions on the number of shares held.

The Banking Regulatory Administration reportedly met with representatives from several banks in January.

The report indicates that regulators are considering whether to allow some shareholders to become major investors in 1 to 2 additional banks, while the Banking Regulatory Administration met with representatives from several banks in January this year to discuss the possibility of relaxing related policies.

Under the current mechanism, if a major shareholder of a commercial bank intends to increase their stake in the bank, they must obtain approval from the Banking Regulatory Administration, which will review and decide based on the qualifications of the shareholders and the urgency of the bank’s capital needs.

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