Bank
Insurance hobble starts, the bank industry should carefully face to
mixed operation
Source:
China
Business Times Date: 17 Oct, 2006 Experts
believe that to solve their own problems should focus on the rapidly
expanding. Until
the first half of this year, the banks have grown up with an expansion
of the impulse. Their total assets had reached to 40.95 trillion Yuan.
Globally, the financial mixed operation is a trend. It seems that the
four major state-owned banks are interested in the establishment of
insurance companies, and the China Banking Regulatory Commission and
other supervisors have expressed their support. Previously, the banks
have served as agencies for a number of insurance products.
Bank
Insurance hobble starts In
China, people are more likely to trust banks, and the advantages of
banks outlets will speed up the cooperation between Bank and Insurance.
However, Tan Ruyong, the expert of Modern Financial Institute of
Shanghai University of Finance and Economics also found that, for
various reasons, the impulse of insurance companies to enter the
banking sector is stronger than the banks enter the insurance. At
present, most of Chinese insurance companies have established business
relations of cooperation with banks, Bank Insurance premium income
rapid growth from 50 billion in 2001 to 1,200 billion Yuan in 2005.
Financial experts Han Huang from China Banking Regulatory Commission
Fujian Bureau, said that it is a inexorable law that insurance
establish relations of cooperation with bank which is the interaction
between Global Economic Integration environment and cooperation
mechanisms. The key issues of management relationship of cooperation
between bank and insurance are to make clear strategic positioning and
promotion of innovative mechanisms for cooperation.
"At
present, bank is mainly an agency in sales of insurance products." Sun
Shaowei from AIA introduced, "However, buy insurance products in banks
are quite difference between directly buy in insurance companies, its
after-sales service may a little inferior." Another person of insurance
said:" Since the commission for banks, the price of some Bank Insurance
products may higher than other products of the same insurance company."
Some in industry believe that the current insurance products sale in
banks is lack of personality. Bank Insurance products have a
bottle-neck in development. "Bank
Insurance should slow down their pace. The cooperation between Bank and
Insurance is focus on a shallow level such as sales agents, at present,
it is necessary to make financial group and insurance companies become
shareholder for banks, such as Ping An Insurance participate in bid for
Guang Dong Development Bank." Tan Ruyong said. on Confucianism.
Chinese-funded banks in the capital adequacy ratio, the proportion of
non-performing assets, profitability models, and other aspects of
retail banking, despite the increase in fast, but compared to the
advanced international banking institutions, the gap is still
relatively large, therefore, on Ru-Yong called on banks to resolve the
their own problems well the urgency of a strong, and then mixed
operation can be carried out.
Mixed
industry supervision is the trend of the times
State
Council Development Research Center Zhang Chenghui, financial experts,
pointed out that international experience shows that the bank insurance
commission income could be accounted for 10% of bank profits, the
premium income could be accounted for more than 20% of all premium
income of insurance company. The cooperation between Banks and
Insurance will be from the counter sales to after-sales service,
ancillary services, data and other aspects of resource sharing, etc.
Mixed
operation and mixed supervision is an international trend. 55 days
later, the financial industry will be fully open to foreign investment,
with an increasing number of banks involved in other industries,
financial supervision must be made to change. Dr. Cao Honghui, Academy
of Social Sciences, Institute of Finance, pointed out that the original
separated supervision is easy to cause supervision overlaps or gaps.
September 13, Li Yong, the Vice Minister of Finance said at
international financial forum, China are trying to establish the
financial coordination mechanisms between the Central Bank, financial
department, financial supervision and other relative departments in
order to adapt to the needs of integrative operation and development
trend of financial industry. There are also circulating that appears to
support the views of Li Yong. It is rumored that China may set up a
super financial regulator, it will be a permanent body under the State
Council establish the FSC and is responsible for formulating the
specific development strategy of the country's financial strategy,
banking, securities, insurance and other financial industry involves,
and supervise the financial mixed operation in the future.
In
fact, as early as September 2000, the Central Bank, CSRC and CIRC had
established a "joint meeting of supervision", it is clear that the
results are unsatisfactory and there are strong "provisional
government" color because of its lack of long-term consideration and
planning. In 14 October, 2006 (China) Bankers Forum, vice chairman of
CBRC Tang Shuangning said the establishment of Financial Supervision
and Coordination Committee has not yet conclusive, anything has its two
sides, reasonable and unreasonable side, no absolute good nor absolute
bad. With development of financial industry mixed operation, the
establishment of Financial Supervision and Coordination Committee is
being proof. On supervision framework, we should change. Tan Ruyong
said that "separated operation and separated supervision could adapt to
the past situation in China, but with the development of the
international financial situation, mixed operation and mixed
supervision is the trend of the times. It¡¯s impossible such a sudden
transition for a mixed supervision, because of China's reform is
gradual." It is demands to make a few changes on separated supervision
such as further strengthen the existing system, tripartite joint
meeting. The three parties should collaboration well and shouldn¡¯t
mutual shuffle to cause supervision overlaps or gaps.
The
preconditions for Banks and other financial mixed operation is legal
protection, the financial expert of Chinese People's University, Zhao
Xijun warned that "there are no access system, legal protection or
management policy for mixed operation. If mixed operation is not
subject to legal restrictions, the merger of the CBRC and CIRC will be
natural." Tan Ruyong said in the legal level, it should be supported,
but changing laws always need time, "However, the laws have set aside
space for commercial banks, as special methods to dissolve the special
problems, since commercial bank establish insurance company just need
approved by State Council departments, so it is could be within a short
time." However, it is demand an adjustment and development process for
the financial mixed operation¡¯s platform, technical conditions, the
reserve personnel of mixed operation, prevent of transferring the
financial risk to each other. Concerning commercial banks carry out
across-industry operation, the risks including not only industry's own
credit risk, operating risk, marketing risk, but also some new risks,
such as the risk of related party transactions, the risk of information
disclosure and conflicts of interest, which are all need special
attention. Therefore, it is still a long way to go for China¡¯s banks to
study foreign financial groups¡¯ experiences on mixed operation, involve
other financial areas and carry out mixed operation well.
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