Insurers given guidelines on investments
(Xinhua)
Updated: 2006-10-18 09:37
The China Insurance Regulatory Commission (CIRC), the country's insurance
regulator, has issued guidelines for insurance firms investing in the banking
sector.
The recently published circular authorizes the country's
insurance firms and institutions to buy shares in China's unlisted commercial
banks.
The opening of bank shares to insurance firms will help better
distribute insurance funds and improve investment earnings, said a source with
the commission, who asked to remain anonymous.
According to the
circular, China's insurers may invest no more than 3 percent of their total
assets in unlisted commercial banks.
Insurance company investments in
the banking sector have been divided into two categories: general investments
where less than 5 percent of a bank's shares are held, and major investment
stakes of more than 5 percent of a bank's shares.
It emphasized that
insurance firms which plan to make major investments should not buy shares in
more than two commercial banks.
The total assets of China's insurance
industry reached 1.7 trillion yuan (212.5 billion U.S. dollars) at the end of
June.
The government has expanded investment options by encouraging
insurers to directly or indirectly invest in capital markets, securities
products, real estate and venture capital, and to purchase shares in commercial
banks.
CIRC figures show that Chinese insurers are major investors in
the country's stock market, holding as much as 49.9 billion yuan (6.3 billion
U.S. dollars) in stocks, mainly in commercial banks.
Wu Dingfu, chairman
of the China Insurance Regulatory Commission (CIRC), said recently that the CIRC
supports insurers investing in bank shares. "The CIRC is also ready to receive
applications from banks to set up insurance firms," he said.
The
financial regulations that took effect in China in 1995 originally banned banks
from engaging in the insurance business, and vice versa.
Under its
agreement with the WTO, China is expected to fully open its financial markets to
foreign competitors by the end of 2006.
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