2014-03-07

State Owned Banks Reject Yu E Bao Deposits

Three State-Owned Banks Reject Agreement Deposit from Yu'E Bao due to High Price
The headquarters of three giant, state-owned commercial banks claim that they have refused accepting agreement deposit from Tianhong Asset Holdings, the mutual fund owned by e-commerce giant Alibaba and sole partner in the company's online financial platform, Yu'E Bao, reported eeoo.com.cn.

An employee at one of the state-owned banks, both of whom are not named in the article, claimed that their reluctance to take agreement deposit from Tianhong is because the mutual fund wants to negotiate depositing huge amounts of capital in return for an interest rate between three and five percent above the national interest rate.

A staff member of Tianhong, who remained nameless in the report, revealed that the mutual fund hasn't made any deposit agreements with a domestic commercial bank so far, despite daily attempts to contact China's big banks to make a deal.
Chinese banks are raising the deposit rates on their own products in order to fend off the competition, but with NPLs set to rise in a slowing economy, the loss of easy profits comes at the worst possible time.

Alibaba isn't sitting still.

Alibaba may be first to set up Internet bank
Hangzhou-based Alibaba may receive the green light to establish an Internet-based bank, one of the two private banks to be set up in Zhejiang Province. The other private bank will be controlled by more than 10 private companies from Wenzhou, Great Wisdom AAStocks news agency reported yesterday, citing unnamed sources.

Private banks will supplement the banking system as it promotes differentiated competition, said Liao Min, head of the Shanghai Bureau of the China Banking Regulatory Commission.

Private banks will have restricted licenses which limit their business scope. They will also target different customer and territorial markets.

Market watchers expect the licenses to be issued after the annual session of the National People's Congress being held in Beijing.

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