China's bank regulators will require that foreign banks taking stakes in domestic commercial banks hold those stakes for at least five years, rather than three as at present, to reduce risks for the local banks.

Yi Xianrong, a finance researcher from the Chinese Academy of Social Sciences, a government think tank, told Xinhua Wednesday that such rules were one way the country could manage cross-border investment and capital flows.

The change was announced Tuesday by China Banking Regulatory Commission chairman Liu Mingkang at a CASS seminar. Liu said the longer lock-up was meant to ensure the safety of the country's banking system.

He said prudent cross-border financial supervision was one reason China's banking system had fared much better amid the global financial crisis, and it was also critical for healthy banking system development.

During the past three months, some major foreign shareholders in local banks sold their stakes to raise cash. The Chinese institutions involved included the Bank of China (BOC) and the China Construction Bank (CCB).

On Dec. 31, UBS sold its entire 3.378 billion H-share stake in the BOC; on Jan. 8, Hong Kong tycoon Li Ka-shing sold 2 billion of his total 5 billion shares in BOC, and the Bank of America, the second-largest shareholder in CCB, cut its 19.13 percent stake to 16.72 percent by selling 5.62 billion CCB shares.

(Xinhua News Agency April 1, 2009)