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Local trust companies may open

By Zhang Ran (China Daily)
Updated: 2007-05-09 09:20

Many trust firms such as Jinxin Trust & Investment Co Ltd andJilinPan Asia Trust & Investment Co Ltd have been stuck in credit crises because of illegal trading and lack of risk management. In March 2006, Jinxin Trust was found guilty of illegally amassing savings and fined 10 million yuan.

To help restructure trust firms into professional wealth management institutions, the government may also allow commercial banks to take a controlling stake in trust firms.

Bank of Communications is likely to take a controlling stake inHubeiInternational Trust & Investment Co Ltd, an unnamed source from the bank said. The deal is yet to get official approval.

"Commercial banks owning trust firms is common in developed countries," Zhao said, "as more and more commercial banks are developing into financial holding companies."

TheChina Banking Regulatory Commissionlaunched two rules in February and April to guide trust firms in developing new businesses. According to these rules, trust firms may engage in pension fund management, wealth management in overseas investment, private equity investment, asset securitization and financial leasing, apart from their primary lending business.

The rules require trust firms to have a registered capital of at least 1 billion yuan in dealing with wealth management in overseas investment.

"The rules have better outlined the status of trust firms and stipulated areas we are allowed to enter," an industry insider fromYunnanInternational Trust & Investment Co Ltd said, adding this would lead to a restructuring of the trust industry. "Some poor performers may be kicked out of the business as a result."

(China Daily 05/09/2007 page13)