China Converts Increasing Number of Rural Credit Societies into Rural Commercial Banks

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Analysts expect Chinese financial regulators to further drive the consolidation of rural credit societies into larger rural commercial banks, as part of efforts to shore up the health of the regional banking sector.

On 12 July the China Banking and Insurance Regulatory Commission (CBIRC) announced that it had given its approval for Harbin United Rural Village Commercial Bank Share Company Limited (哈尔滨联合农村商业银行股份有限公司) to officially commence operation with registered capital of 2 billion yuan.

Since the start of June CBIRC has given its approval to the launch of multiple rural commercial banks that were founded via the merger of rural credit societies.

These include:

  • Heilongjiang Qinggang Rural Village Commercial Bank (黑龙江青冈农村商业银行股份有限公司), which obtained approval from CBIRC to commence operation on 21 June;
  • Taiyuan Rural Commercial Bank (太原农商银行), which commenced operation on 28 June;
  • Mianyang Rural Commercial Bank (绵阳农商银行), which held its first shareholders meeting on 28 June, and
  • Shanxi Guangling Rural Village Commercial Bank (山西广灵农村商业银行股份有限公司), whose backers obtained preliminary approval for establishment on 30 June.
  • Cheng Rui (程瑞), deputy-head of the Ping’an Financial Inclusion Research Institute, said to Securities Daily that the conversion of rural credit societies into rural commercial banks had “positive significance,” enabling them to attract larger volumes of capital and improve the efficiency of their operations.

Cheng said it would drive greater standardisation of their corporate governance and force them to adopt strict internal controls, as they will subsequently be included under tighter financial regulations.

Rural commercial banks also have the added advantage of being able to offer more diversified lending products and enjoy higher credit quotas.

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