(Yicai Global) June 29 -- The current status quo in the banking sector will be largely unaffected regardless of how China develops its high-quality investment banks, the China Securities Regulatory Commission said yesterday in response to a report it plans to grant brokerage licenses to commercial banks.

Cultivating these banks is a key means to advance and expand direct financing, the CSRC said in its press release published yesterday. Multiple paths are available to pick from to push their growth and the CSRC is still discussing which to choose. It has no further information to share with the market at present, the agency said.

The regulator’s wish to tear down the partition between commercial and investment banking is actuated by rising competition from overseas actors, Chinese media Caixin reported.

Investment banking is largely forbidden to local banks, though Bank of China and China Development Bank run brokerages under special government dispensation, Reuters reported. The country further opened its financial market starting April 1, thus accelerating overseas-funded brokerages' entry into it. UBS Securities, J.P. Morgan Securities China, Nomura Orient International Securities, Morgan Stanley Huaxin Securities, Goldman Sachs Gao Hua Securities, HSBC Qianhai Securities and Credit Suisse Founder Securities have all received approval to take majority stakes in their joint venture brokerage firms in China thus far.

The CSRC plans to issue brokerage licenses to commercial banks and may choose at least two of the major commercial lenders to run pilot investment banking businesses, financial magazine Caixin Weekly reported on June 27, citing sources.

Breaking the established model of sector-based supervision has long been seen as a historical trend. The CSRC was studying the system and supporting arrangements for commercial banks to apply for brokerage licenses with risks isolated back in March 2015, but no clear timetable was at hand for implementing these policies then, former CSRC spokesperson Zhang Xiaojun said at the time.

Faced with the ongoing emergence of overseas capital-controlled securities companies, which bring considerable pressure and challenges to bear on local rivals, the inevitable growth of high-quality large Chinese brokerage firms has now become a common market expectation.

Editor: Ben Armour