China Citic Bank Corp Ltd and Chinese search engine giant Baidu Inc received regulatory approval on Thursday to establish a direct bank in Beijing, offering financial services remotely via online banking.
As the first direct bank operating as an independent legal entity in China, Baixin Bank will become an open internet-based financial platform that can apply cloud computing, artificial intelligence and mobile connectivity technologies for its users.
It was initiated by two founders with a registered capital of two billion yuan ($290 million). China Citic Bank, the nation's seventh largest asset commercial lender, will hold 70 percent of its stake, and Fujian Baidu Borui Internet Technology Co Ltd will have the remaining 30 percent.
Getting approval from China's banking regulator signifies the launch of a trial plan for reforms on certain business segments of commercial banks. At a meeting in January last year, the China Banking Regulatory Commission said it will guide qualified banks through reforms on establishing subsidiaries and implementing license management for some of their business segments, such as direct banking.
"The market positioning of Baixin Bank is to help people better manage their assets and provide financing for the public. It will combine China Citic Bank's advantages in network, risk control and product development with Baidu's strength in internet technologies and traffic volume to meet individualized financial demands of our clients," said Li Qingping, chairman of China Citic Bank.
Robin Li, chairman and chief executive officer of Baidu, said the internet search leader will profile the bank's clients based on their preferences and financial demands to offer innovative financial solutions.
"China's banking sector has arrived at a historical juncture and will be vitalized by the internet," he said when the two founders announced their plan to launch a direct bank together in November 2015.
Commercial banks are facing increasing pressure of slower profit growth and rising non-performing loans amid China's economic restructuring and interest rate liberalization.
During the first nine months of 2016, the four largest commercial banks posted modest growth in net profit attributable to equity holders, ranging from 0.46 to 2.48 percent.
