More banking licenses likely to be granted in China

Banking sector reform in China has been carried out progressively and with careful consideration, given the sector's significance to the country's economic growth. Over the past few years, a number of deregulations aimed at allowing banks to operate in a more market-oriented environment have been launched. 

These include the establishment of a deposit insurance system, the removal of loan-to-deposit ratios as a regulatory requirement, the introduction of certificates of deposit (CD) that can be issued to corporates and individuals, and interest rate liberalisation.

"In the upcoming 13th Five-Year Plan (FYP) (2016-20), further progress is expected on several fronts, including the potential completion of deposit rate deregulation and the granting of more banking licences to private-sector investors", says Barclays. 

The Plan is also likely to provide more clarity on hybrid ownership reform, and there is a rising possibility of a moderate relaxation of the foreign ownership cap on domestic bank holdings. 

"In addition, an early guidance is expected on allowing banks to expand into other financial subsectors in order to diversify their sources of revenue amid NIM pressure in a more liberalised interest rate environment", added Barclays.