December 11, 2019 / 10:09 AM / 3 months ago

China tightens rules to prevent government losing control of state financial firms

BEIJING (Reuters) - China’s finance ministry said on Wednesday it will make it harder for ownership changes to be made to financial institutions that could lead to the government relinquishing control, in a bid to prevent the loss of state assets.

Effective Dec. 20, any capital increase or share sales of state-owned financial institutions that could cause the government to lose its controlling stake would need final approvals by local bureaus of the finance ministry and local governments, according to the notice from the ministry.

China is sharpening scrutiny of banks and insurers’ shareholders amid fears that loans and investments from the financial firms to big investors could prove a weak point in the country’s financial system.

The latest notice aims to “strengthen the state-owned financial capital management, and prevent the loss of state assets,” the finance ministry said.

The qualification of potential buyers of stakes in the state-owned financial firms will be screened, and buyers will be banned from using leveraged funds to complete the deal, according to the notice.

Any interested foreign buyers will also need approvals from the government to pursue the deal, it added.

Reporting by Cheng Leng, Huizhong Wu and Beijing Monitoring Desk; Editing by Toby Chopra and Muralikumar Anantharaman

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