BEIJING - China aims to widen the channels for private capital to tap the country's banking sector and to encourage private investors to play a bigger role in rural financial institutions, the China Banking Regulatory Commission (CBRC) said on Wednesday.

"There are no policy hurdles to prevent private capital from investing in domestic banks. The regulator will continue to expand the channels for private investment," said Yang Shaojun, deputy director of the CBRC's general office.

The regulator is also pushing private capital to participate in the establishment of rural banks and the joint-stock reform of rural financial institutions.

However, enterprises and individuals who are interested in investing in the banking sector will have to meet certain requirements in order to qualify as bank shareholders, Yang said.

The regulator's requirements include that investors must be high-quality enterprises or individuals with solid finance standing and a good credit record. They must also have a long-term ability for capital replenishment.

Currently, enterprises or individuals are allowed to be shareholders of no more than two banks and are subject to a lock-up period of five years. In addition, they can only own shares of one bank as controlling shareholders and can buy no more than 20 percent of shares as strategic investors.

Private capital currently accounts for 20 percent of the capitalization of the country's joint-stock commercial banks and 45 percent of the capitalization of city commercial banks. Commercial banks in Zhejiang province have the largest amount of private investment, accounting for 73.27 percent of their capitalization, according to the CBRC.

Jiang Liming, deputy director of the Cooperative Finance Supervision Department of the CBRC, said the regulator has substantially raised the proportion of private investment in the rural financial sector and private capital has already become the main investor in rural financial institutions.

Private investors are also encouraged to take part in mergers and acquisitions of the high-risk rural credit cooperatives and are allowed to purchase up to a 20 percent stake, Jiang said.

By the end of 2009, private capital had invested a total of 246.6 billion yuan ($37.9 billion) in the country's rural financial institutions, including rural banks and credit cooperatives.

The investment accounted for 93 percent of the capitalization of the rural financial institutions, the banking regulator said.

According to the CBRC's regulation, rural banks must have a minimum registered capital of 3 million yuan at the county level and 1 million yuan at the township level.

China Daily