China should develop financial holding corporations with proper supervision: researchers

China needs to develop its financial holding corporations using proper, standard supervision, as they play an important role in upholding the safety of the country’s financial system, industry insiders said.

The outline of China’s 13th Five-Year Plan states clearly that there should be “coordinated regulation and supervision” in important financial institutions, financial holding companies and important financial infrastructure.

A financial holding company is defined as a financial group that holds a license in two or more financial fields, such as banking, securities, insurance, funds, trust, futures and financial leasing, and actually operates or controls enterprises in the industry, according to the report released today by the finance research center of the Bank of Communications.

The increasing number of financial holding corporations can be attributed to rapid development in the comprehensive management of China's financial industry, as well as the participation of some entity enterprises which operate a certain range of financial business, the report said.

The standardized development of financial holding companies will be conducive to maintaining the safety of the country’s financial system, said Lian Ping, chief economist at the state-owned bank.

Lian added that through strengthening the supervision of those companies, regulators can grasp cross-industry, cross-market financial information in a more direct and comprehensive manner, and thus detect potential risks in a timely way.

While financial holding companies contribute a lot to serving the real economy, there are also loopholes in terms of related laws and regulations. 

Li Yang, chairman of the National Institution for Finance and Development, said that serving the real economy will be the “first principle” for China’s financial holding companies.

He called for them to shift from being financial product providers to becoming financial service providers to better meet the diversified demands of clients and offer customized solutions for them.

Financial holding companies fall into five categories according to the parent company's attribute: those controlled by financial groups, by central enterprises, by local government, by private companies and by Internet companies.

“As those financial holding companies have different backgrounds, it is rather difficult for us to figure out one unified way to regulate them,” said Yin Jianfeng, the deputy director of the National Institution for Finance and Development.