China is working on guidelines for the establishment of online-only banks.

Regulators in China are pushing for the establishment of new, 100% digital banks to reduce risk in the country’s financial sector. They also want to broaden Chinese banking by allowing participation from new players including foreigners (Reuters).

According to an informed source, more than a dozen groups have been discussing the proposed rules with Chinese regulators. These include banks from outside the country,

China looking to standardize the regulation of online banking

The new online banking rules may allow banks to majority-own their digital banking ventures in the country. China has been easing access for foreigners to its huge financial markets,

The new digital banks may also be allowed to form technological partnerships with tech companies. The new regulations will cover existing online-only banks. These include Tencent’s WeBank, Alibaba offshoot MYbank, search engine Baidu’s AiBank, and China Citic Bank Corp Ltd.

Foreign banks already having a physical presence in China may also be allowed to set up digital arms. These are Citigroup Inc, HSBC Holdings PLC, and Standard Chartered PLC.

In a sign of the times, last month, Amundi, Europe’s largest asset manager with € 1.563 trillion of assets, secured approval for the first foreigner controlled wealth management joint venture in China with Bank of China Wealth Management.

Online banking in China is still minuscule

According to recent official data, assets of the four online banks aggregated only $ 56 billion as at the end of 2018. That was a minuscule 0.15% of the total Chinese banking assets.

In an interview published in Forbes today, Ant Financial’s president of advanced technology business group, Geoff Jiang, said Ant wants to offer Chinese banks a wide range of technology products and services. It now plans to sell in-house expertise to these banks and help them digitalize their operations with tools such as cloud computing and data analytics.

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