Bank of Beijing Cleared To Buy Into ING Insurance JV

China’s regulators approved Bank of Beijing Co.’s (601169.SH) plan to buy into a 50-50 China insurance joint venture with ING Groep NV (ING), the city commercial lender said Friday, clearing the way for Bank of Beijing to gain a foothold in the country’s fast-growing insurance market.

China has been slowly allowing banks to expand into non-banking financial services, though it is still far behind more developed markets like the U.S., where the financial supermarket model, under which banks offer a broad range of financial services, became popular starting in the 1990s. Many major banks in developed markets have since scaled back their operations because of the financial crisis.

Bank of Communications Co. became the first Chinese lender to break into the insurance sector last week when it launched an insurance joint venture with Commonwealth Bank of Australia after a nearly two-year application process.

Bank of Beijing said China’s banking and insurance regulators have approved its plan to take over Beijing Capital Group Co.’s 50% stake in ING Capital Life Insurance Co. The lender added it will pay CNY681.8 million ($99.87 million) for the stake.

“The investment is in line with the company’s diversification strategy, and will help promote the bank’s strategic cooperative partnership with ING,” Bank of Beijing said in a statement. ING owns 16% of the small Chinese lender.

“The acquisition will also help improve the bank’s retail finance business, and allow the company to reap investment returns from the fast-growing domestic insurance market,” it added.

The bank said it will use its working capital to finance the deal, and the investment won’t have a significant impact on its capital adequacy ratio.

ING Capital Life Insurance, established in 2002, is based in Dalian, in northeastern China, and has six branches in the country’s northern provinces. The venture reported premium income of CNY866 million last year, giving it less than a 1% share of China’s life-insurance market.

China’s banking and insurance regulators signed an agreement two years ago to allow lenders to take stakes in insurers, but there was no material progress until November last year when Beijing unveiled detailed rules governing banks investments’ in the insurance sector, amid global concerns about insufficient regulatory oversight of cross-sector operations following the global financial crisis.

China Construction Bank Corp. and Bank of China Ltd. have also been preparing to launch insurance units.

China Construction Bank said in December it will acquire ING’s 50% stake in an insurance venture with China Pacific Insurance (Group) Co. And Bank of China Ltd. is buying part of Standard Life PLC’s 50% stake in a venture with TEDA International Holding (Group) Co.