PBOC governor calls for more private bank development

China needs to do more to develop private banks and make asset securitization a standard practice as it tries to strengthen its financial system, Zhou Xiaochuan, governor of the central bank, wrote in an article published on the bank's official website.

Zhou argued China should accelerate efforts to open up the financial system so it can be better able to cope with economic shocks, for instance by allowing more private sector participation in the banking sector to create a level playing field for small and large financial institutions.

The central bank will loosen the market entry threshold for small financial institutions, so that private banks and micro credit companies can provide financial services to small and micro-sized firms, Zhou said.

China should make asset securitization a regular part of its markets, as it could help banks deal with bad loans and act as an alternative fundraising channel to the shadow banking sector, such as high-yielding wealth management products

Meanwhile, the central bank will push forward with a deposit insurance system so as to allow smaller financial institutions to compete with large ones, Zhou wrote in the article.