Financial Conglomerates in China: Legality, Model and Concerns

Through recent amendments of its Commercial Bank Law and Securities Law, China has gradually softened its previous position mandating the segregation of financial business and supervision, as well as explored the financial conglomerate operation. Two models are considered in particular, namely the “universal bank” model, prevailing in Europe, and the “financial holding company” (FHC) model in the US. This Paper suggests that now neither the universal bank nor the FHC model should be embraced hastily in China without a critical eye. While the FHC sounds a likely choice, it contains drawbacks and unfitness that merit discussion. The choice of models largely relies upon a careful reading of legal, factual and historical contexts. Transforming State Owned Commercial Banks (SOCB) and other financial institutions into the public-held and independent companies shall be a prerequisite and propellant to any meaningful structural reform, including the financial conglomerate issue.