Following the prosecution of the former chairman of the Chinese company Anbang Insurance Group on charges of committing economic crimes, the company would be taken over by Chinese insurance regulator for a year.
The China Insurance Regulatory Commission (CIRC) said on its website that the measure was taken to safeguard the interests of the consumers of the company because its unlawful activities may result in the company becoming insolvent.
CIRC will take over the controls of the company from February 23. The agency added that the debt and the other financial obligations of the company would not be a hindrance to its controlling and the agency would operate the company as a private firm despite it undergoing an equity restructuring.
It has been a few years that Anbang has been facing troubles even as the company shot to fame globally after buying New York’s Waldrof Astoria hotel in 2015.
Claiming that one of the insurance products offered by the company "deviates from the fundamentals of insurance", the CIRC had banned the company froom oferring any new insurance products for the public for three months in May last year.
Anbang had declared a month later that Wu Xiaohui - its then-chairman, had been incapacitated to conduct his duties.
Chinese authorities have been cracking down on companies that possess high levels of debt and this latest development is believed to be a part of that crackdown. The Chinese government has also been attempting to reduce capital outflow from the country and has been closely examining and scrutinizing all overseas acquisitions and deals by Chinese companies.
"Anbang has built up its position in the financial industry very aggressively over the last couple of years (and) used a lot of leverage," said Hao Hong, research head and chief strategist at China's Bank of Communications.
"The regulators want people to expand properly, taking proper risk and not over-extend leverage," Hong added.
Some companies run high risk of "endangering entire financial system by adding on systemic risk," because they have made use of their significant leverage in their efforts for aggressive expansion strategies, Hong said.
"At the same time, I would say because of the aggressiveness and because of their eagerness to expand business, some of them may be engaged in some wrongdoings, and now they are getting found out," he added.
(Source:www.cnbc.com)
The China Insurance Regulatory Commission (CIRC) said on its website that the measure was taken to safeguard the interests of the consumers of the company because its unlawful activities may result in the company becoming insolvent.
CIRC will take over the controls of the company from February 23. The agency added that the debt and the other financial obligations of the company would not be a hindrance to its controlling and the agency would operate the company as a private firm despite it undergoing an equity restructuring.
It has been a few years that Anbang has been facing troubles even as the company shot to fame globally after buying New York’s Waldrof Astoria hotel in 2015.
Claiming that one of the insurance products offered by the company "deviates from the fundamentals of insurance", the CIRC had banned the company froom oferring any new insurance products for the public for three months in May last year.
Anbang had declared a month later that Wu Xiaohui - its then-chairman, had been incapacitated to conduct his duties.
Chinese authorities have been cracking down on companies that possess high levels of debt and this latest development is believed to be a part of that crackdown. The Chinese government has also been attempting to reduce capital outflow from the country and has been closely examining and scrutinizing all overseas acquisitions and deals by Chinese companies.
"Anbang has built up its position in the financial industry very aggressively over the last couple of years (and) used a lot of leverage," said Hao Hong, research head and chief strategist at China's Bank of Communications.
"The regulators want people to expand properly, taking proper risk and not over-extend leverage," Hong added.
Some companies run high risk of "endangering entire financial system by adding on systemic risk," because they have made use of their significant leverage in their efforts for aggressive expansion strategies, Hong said.
"At the same time, I would say because of the aggressiveness and because of their eagerness to expand business, some of them may be engaged in some wrongdoings, and now they are getting found out," he added.
(Source:www.cnbc.com)
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