China allows insurers to buy into banks

BEIJING, June 9 (Reuters) China's insurance regulator said on Friday that it would start letting insurers take stakes in the country's banks, in a step towards allowing more interaction between the banking, insurance and securities sectors.

China has long maintained barriers between the three financial sectors, wary of the transmission of financial risks among them.

The China Insurance Regulatory Commission said in a statement on its Web site (www.circ.gov.cn) that the move would help create synergies between the banking and insurance industries.

''We support insurance companies to buy into, or even take controlling stakes, in well-managed, profitable banks that have a strong customer base,'' the statement cited Wu Dingfu, head of the regulator, as saying.

The insurance regulator also said that it would allow insurers to invest up to 15 percent of their assets in overseas markets, fleshing out an earlier regulation that created the framework for such investments to be permitted.

The central bank and foreign exchange regulator said on April 14 that the country's insurers could buy foreign exchange to invest in overseas fixed-income and money market instruments under a set quota, but they did not specify the quota.

That opening of the gate to outflows of capital was part of a larger reform that also set the stage for allowing banks and asset management companies to invest in overseas capital markets on behalf of clients.

The regulator said that the moves would complement earlier steps it had taken to broaden the investment channels available to the country's insurance companies, to reduce their reliance on bank interest.

Earlier steps included allowing insurers to invest in infrastructure projects like railways, and to invest up to 5 percent of their assets in domestic stock markets.

The regulator said that until now, insurers had invested an average of 3 percent to 4 percent of their assets in stocks.

The move of allowing insurers to invest in banks has been long anticipated.

State media had previously reported that Ping An Insurance , China's second-largest life insurer, was looking to buy a 60 percent stake in Shenzhen Commercial Bank for 0 million.

Banking sources told Reuters in May that Ping An had already received initial approval from the insurance regulator, citing an internal document.

REUTERS PV PM1718