|
China regulator wary of banks entering insurance
2006-12-23
BEIJING - China's top banking regulator has warned against allowing the country's commercial banks to set up insurance companies, saying successful combinations of the two businesses are rare, a Chinese paper reported on Saturday. The state-controlled China Construction Bank and Bank of Communications have both applied to the China Banking Regulatory Commission to set up insurance firms. But commission chairman Liu Mingkang has repeatedly expressed wariness about letting banks take on the role of insurers, the Economic Observer reported, citing unnamed sources. "Liu Mingkang indicated that he does not look favourably on the prospects for commercial banks establishing insurance companies, because it is very hard to successfully integrate their cultures," the weekly paper reported, citing a speech by Liu. Liu has said more than once that the business models of lenders and insurers are so different that there are few examples of successful hybrids, the paper said. While insurers often offer staff relatively low wages and high commissions for new business, banks must focus on containing risk and offer higher but more fixed wages, it said. The report said the commission had not issued a final decision on the two Chinese banks' applications to venture into insurance. But Liu was described as being wary of burdening China's debt-troubled banks with more risk. China has been exploring the removal of barriers separating banking, securities and insurance so that banks can diversify their revenue streams and rely less on interest income. Those lines have started to blur as insurers have purchased minority stakes in banks and lenders have been given the all-clear to create fund management ventures.
| 
