Licensed for 13 years! What signals are being released by this bank's private banking division's major transformation?

What is the strategic significance behind the revocation of the Bank of Communications private banking license?

China Economic Journal reporter Zhang Manyou reports from Beijing

Since March 28, 2007, when Bank of China first launched private banking services in the country, it has been 19 years. Recently, media reports indicated that Bank of Communications plans to apply for the revocation of its private banking specialized institution license.

In response, Bank of Communications stated that in order to strengthen its wealth financial characteristics and enhance customer service capabilities, the bank is implementing retail sector institutional reforms approved by its board of directors, and is making related organizational structure adjustments, which are being advanced steadily in strict accordance with regulatory procedures. The existing private banking business services, rights, and processes will not be affected.

Wang Runshi, a special researcher at the Shanghai Financial and Development Laboratory, told China Economic Journal reporters that the revocation of the license does not mean the cessation of private banking business. Future private bank competition will no longer focus on who holds a standalone license, but rather on who can more efficiently integrate the bank’s resources to provide truly comprehensive financial solutions for clients.

Private Banking License “Transferred from Holding to Revocation”

Industrial and Commercial Bank of China was approved in 2008 as the first private banking specialized institution. Bank of Communications was granted a private banking specialized license in September 2012, making it the third institution in the country to obtain such a license after Industrial and Commercial Bank and Agricultural Bank, operating under this license for over 13 years.

According to Bank of Communications’ 2025 performance report, by the end of 2025, the number of private banking clients will reach 105,100, an increase of 11.62% compared to the end of 2024; managing private banking client assets of 1,430.128 billion yuan, an increase of 10.39% compared to the end of 2024.

“Wang Runshi told reporters that obtaining a private banking specialized institution license was extremely difficult back then and was considered a rare pilot ‘franchise’ resource.” The private banking specialized institution license is not a common license applicable nationwide, but rather a special pilot program promoted by the former China Banking Regulatory Commission in the context of building an international financial center in Shanghai. So far, only five banks in the country hold this license, namely Industrial and Commercial Bank, Agricultural Bank, Bank of Communications, Industrial Bank, and Hengfeng Bank. “Holding a license means that the private banking department belongs to a ‘branch-level specialized institution,’ with independent accounting, autonomous operations, and decision-making authority for external cooperation, equivalent to having a relatively independent operating ‘special zone’ within the bank.”

Nie Junfeng, chairman of Jinghua Shijia Family Office, told reporters that private banking licenses are fundamentally different from the specialized institution licenses previously approved by the National Financial Regulatory Administration for commercial banks, such as credit card centers, bill centers, and fund operation centers. “Specialized institutions like credit cards, bills, and fund operations have independent balance sheets and income statements, with a mature divisional operation foundation; however, private banking is entirely different, as the core client resources are mostly concentrated at various branch levels, with the head office’s private banking department only performing routine management functions. The revenues generated by the business can only be reflected through shadow assessments, making it impossible to conduct substantive performance accounting and evaluations.”

Strategic Choices Behind the Changing Landscape: Competitive Pressures in a Saturated Market

Licenses were once a scarce resource, but under the profound changes in the current banking operating environment, their “double-edged sword” effect is gradually becoming evident.

In Wang Runshi’s view, although each bank’s private banking business data performance is still fairly good, the limitations of the “specialized license” model are becoming apparent in the current environment, primarily facing three pressures.

First, the “island effect” of internal collaboration: While the specialized institution model has strong independence, it can easily form resource barriers with the parent bank’s retail system. High-net-worth clients are often customers of corporate banking, investment banking, or retail, and independent operations may lead to fragmented service capabilities, even resulting in internal competition for customer resources due to assessment issues. Second, operational cost and efficiency problems: Independent operations require independent middle and back office support, leading to redundant construction of IT systems, risk control models, etc., making it difficult to share resources across the bank and raising operational costs. Third, changing customer needs: Today’s high-net-worth clients’ demands have shifted from simple “preservation and appreciation” to comprehensive solutions involving “wealth inheritance + diversified investment + risk isolation,” which requires mobilizing resources from the entire bank and even across industries, something a standalone private banking department cannot efficiently achieve.

Yang Haiping, a special researcher at the Beijing Wealth Management Industry Association, told reporters that the current pressures facing private banks mainly stem from: client growth entering a saturation phase, with inward competition leading to stagnant business growth; while specialized institutions bring more flexible resource allocation permissions, they also introduce coordination challenges. The deeper motivation for the revocation of the private banking specialized institution license is to increase coordination, enhance customer conversion rates, and solve the aforementioned challenges.

The reporter noted that regarding the retail business adjustments mentioned in Bank of Communications’ response, the bank’s board of directors has already reviewed and approved the “Proposal for Deepening Retail Sector System and Mechanism Reform” in February of this year.

It is noteworthy that this adjustment is not a retreat from business, but a reconstruction of service logic. Wang Runshi believes that for clients, the revocation of the private banking specialized institution license is not just an internal structural adjustment of the bank; it signifies a qualitative change in the resources that clients can mobilize and enjoy. “In simple terms, you may have previously been dealing with an ‘independent private bank boutique,’ but in the future, you will be directly connected to the ‘resource pool of the entire Bank of Communications Group,’ such as enjoying investment research services, obtaining ‘1+N’ comprehensive solutions, a smoother ‘full lifecycle’ service experience, and upgrades to digital experiences. This adjustment aims to eliminate artificially set ‘boundaries,’ making private banking clients no longer isolated ‘island clients’ within a ‘private banking institution,’ but rather becoming the core of the entire bank’s ecosystem. The bank will no longer just sell products, but mobilize the entire group’s strength to solve a package of issues related to wealth preservation, appreciation, inheritance, and the underlying business management.”

(Editor: Yang Jingxin Review: He Shasha Proofreading: Yan Yuxia)