As the "internal bank" of the enterprise group, the enterprise group finance company will welcome the development of new regulations. The China Banking and Insurance Regulatory Commission (CBRC) has officially issued the "Measures for the Management of Enterprise Group Financial Companies" (hereinafter referred to as the "Measures") to strengthen risk management and implement hierarchical supervision while expanding opening-up.

Financial companies belong to non-bank financial institutions, which are initiated and established by enterprise groups and are mainly used to serve the financial needs of internal members of enterprise groups and upstream and downstream enterprises of the group. Through financial companies, enterprise groups can make overall planning for group liabilities, reduce financial costs, and then strengthen the centralized management of group funds and improve the efficiency of fund use.

Because of its close connection with the real economy, the standardized development of financial companies is very important. "In recent years, the business risks of enterprise groups have been transmitted to financial companies, and the problem has become increasingly prominent, especially when individual financial companies are used by the group and become tools for external financing, which not only accelerates the transformation of industrial risks and financial risks, but also causes a large negative social impact." The head of relevant departments of the banking and insurance Regulatory Commission said.

Due to the earlier introduction of the previous management methods, it has been unable to meet the needs of the high-quality development of the financial company industry and the current effective supervision.

It is imperative to further strengthen the supervision of financial companies and guide their operation in accordance with the law. Specifically, the Measures adjust the access standards and expand the opening up. From the applicant's total assets, business income, total profit requirements, etc., the threshold for the establishment of financial companies has been raised, and the regulatory guidance of strict access and optimal selection has been reaffirmed, so as to guide enterprise groups to rationally apply for the establishment of financial companies. At the same time, it is clear that foreign multinational groups can directly initiate the establishment of foreign finance companies to provide financial services to their members in China.

It is worth noting that the Measures propose that an enterprise group can only set up one finance company. "In recent years, with the rapid development of the financial market, some enterprise groups have undergone structural changes such as mergers, divisions and restructuring, and two or even more financial companies have appeared under their subsidiaries. For this reason, the Measures specifically limit the number of financial companies established by enterprise groups." Bank of China Research Institute postdoctoral Li Yifan said.

At the same time, the "Measures" optimize the business scope of the financial company and strengthen its main responsibility, that is, focus on serving the internal group and return to serving the source of the real economy. The Measures also increase the requirements for corporate governance and shareholder equity supervision, clarify that shareholders, actual controllers and groups shall not interfere with the business operations of financial companies, strengthen the construction of corporate governance with the characteristics of financial companies, and enhance the independence of financial companies as legal persons.

Source: Economic Daily