THE banking regulator said Friday that it will permit the establishment of more privately owned banks and allow foreign investors to participate in the reform process to help shore up the State-dominated financial sector.

    The government has taken a series of steps to increase the participation of private capital in the financial sector with the aim of improving services to non-State companies and lessening government liabilities in the banking sector.

    “Promoting the development of private banks helps deepen financial system reforms, stimulate the vitality of financial markets and shore up financial institutions,” the China Banking Regulatory Commission (CBRC) said in a guidance note for setting up private banks.

    “We should treat domestic capital, State-owned capital and overseas capital fairly and equally, and actively encourage qualified private firms to launch private banks,” it said.

    Private investors will also be allowed to buy stakes in the existing banks as the authorities encourage such banks to conduct ownership reforms, it said.

    CBRC Chairman Shang Fulin said foreign shareholding restrictions in China’s domestic banks, however, will not be impacted by the private bank measures. Overseas participation is constrained by existing foreign investment regulations, Shang said at a press conference Friday.

    China restricts overseas investment in a domestic lender to no more than 20 percent for a single investor, and to 25 percent for all foreign investment.

    China’s top banking regulator also said that more than 40 institutions have submitted applications to establish private banks. In its guidance, the CBRC said it will control the pace of setting up new private banks to help ward off potential risks.(SD-Agencies)