Private banks to expand

Development of smaller banks including the privately owned banks will break the "too-big-to-fail" moral hazard of dominant big State-owned banks, Ma Delun, former deputy governor of the People's Bank of China, the central bank, said at a forum on Saturday.

The growing demand of small enterprises for financial services will bring great prospects for the development of the privately owned banks, Ma said.

However, challenges for privately held banks include high financial and operation costs, as well as higher demand for risk control as their target clients are those with bigger default risks, he said.

China launched a pilot program in March to open the State-dominated banking sector to private investors.

The banking regulator approved 10 companies including e-commerce giant Alibaba and Tencent to participate in the establishment of five pilot private banks.