Five of China’s six big state-owned banks have grabbed licenses from regulators for their debt-equity conversion vehicles to operate privately offered investment funds.
The Asset Management Association of China (AMAC) recently announced that a subsidiary of Bank of Communications’ (BOCOM) debt-equity conversion vehicle had successfully completed filing and registration for privately offered funds on 25 May.
The subsidiary, BOCOM Capital Management Co., Ltd. (交银资本管理有限公司), was established at the end of December 2018 in Shanghai, with registered capital of 500 million yuan.
BOCOM Capital is registered as a privately offered equity and venture investment fund manager, and is wholly invested by BOCOM Financial Asset Investment Co., Ltd. (由交银金融资产投资有限公司).
The move means that the debt-equity conversion vehicles of five of China’s big state-owned banks, including Agricultural Bank of China (ABC), Bank of China (BOC), China Construction Bank (CCB) and ICBC, have obtained approval to undertake non-debt-equity conversion investment operations.
Huang Dazhi (黄大智), a researcher with the Suning Financial Research Institute, said that following the implementation of new asset management regulations at the start of 2018 and the phase-based launch of leverage reduction and NPL-reduction targets, Chinese banks have been compelled to expand beyond just debt-equity conversion operations.
If banks want to compete with other asset management entities on the same stage, they need to diversify their operations, and add other investment operations in the asset management sphere.