China's banking regulator said Monday that it has approved the setting up of the China Post Savings Bank, creating the nation's fifth-biggest lender by deposits from a reorganization of the post office.

The government will split all financial businesses from the State Post Bureau with the new lender to be established within six months, the China Banking Regulatory Commission said in a statement on its Web site.

China is separating commercial businesses from government agencies in order to curtail corruption and improve efficiency. Post Savings Bank, with access to 36,000 postal outlets nationwide, will be a new rival for Agricultural Bank of China, the weakest by asset quality of the nation's four biggest state- owned banks.

"The birth of the new bank may complicate the role of Agricultural Bank, which also has most of its outlets in rural areas," said Qiu Zhicheng, a banking analyst at Haitong Securities in Shanghai. "China Post has never done lending business before."

The government is encouraging banks to write down bad loans and increase capital by selling shares to prepare them for increased foreign competition.

China is committed to opening the banking industry by the end of this year, allowing HSBC Holdings, Citigroup and other foreign lenders to compete for China's US$1.84 trillion of household savings.

The banking regulator said last July that it would set up a post savings bank with 1.23 trillion yuan, or $153 billion, of deposits, which is 10 percent of China's household savings. About two-thirds of the postal bureau's outlets are in rural areas.

China Post, which started taking deposits in 1986, has more than 352 billion yuan of assets, 260 million account holders and 70 million debit card holders, according to its Web site. Its deposits are held by the central bank, the People's Bank of China.

SHANGHAI China's banking regulator said Monday that it has approved the setting up of the China Post Savings Bank, creating the nation's fifth-biggest lender by deposits from a reorganization of the post office.

The government will split all financial businesses from the State Post Bureau with the new lender to be established within six months, the China Banking Regulatory Commission said in a statement on its Web site.

China is separating commercial businesses from government agencies in order to curtail corruption and improve efficiency. Post Savings Bank, with access to 36,000 postal outlets nationwide, will be a new rival for Agricultural Bank of China, the weakest by asset quality of the nation's four biggest state- owned banks.

"The birth of the new bank may complicate the role of Agricultural Bank, which also has most of its outlets in rural areas," said Qiu Zhicheng, a banking analyst at Haitong Securities in Shanghai. "China Post has never done lending business before."

The government is encouraging banks to write down bad loans and increase capital by selling shares to prepare them for increased foreign competition.

China is committed to opening the banking industry by the end of this year, allowing HSBC Holdings, Citigroup and other foreign lenders to compete for China's US$1.84 trillion of household savings.

The banking regulator said last July that it would set up a post savings bank with 1.23 trillion yuan, or US$153 billion, of deposits, which is 10 percent of China's household savings. About two-thirds of the postal bureau's outlets are in rural areas.

China Post, which started taking deposits in 1986, has more than 352 billion yuan of assets, 260 million account holders and 70 million debit card holders, according to its Web site. Its deposits are held by the central bank, the People's Bank of China.