BEIJING, Nov 17: Authorities said on Wednesday they will permit domestic commercial banks to set up fund management firms, a move that would boost financing avenues for banks and funnel fresh funds into stalled stock markets.

"Allowing commercial banks to set up fund management operations is just one innovation (the comes with) ongoing financial system reform," the China Banking Regulatory Commission (CBRC) said in a statement on its website.

The CBRC is currently working on new rules, along with the central bank and the securities regulator, at the request of the State Council. Such changes would likely allow commercial banks to issue money market, bond and stock investment instruments to provide long-term stable financing.

It also encouraged banks to team up with qualified local and overseas institutional investors to gain experience in running fund management operations.

The CBRC statement was backed by the central bank, which in its third quarter monetary policy review said it was a "realistic option" for banks to branch out into the fund management business.

By doing so, banks could more effectively allocate their funds, which could be channelled into the capital markets in an orderly manner, the central bank added. Earlier media reports said China's largest state lender, the Industrial and Commercial Bank of China (ICBC), was awaiting approval to start a fund management venture with several partners.

Separately, China's Supreme Court issued regulations governing brokerage accounts amid efforts to shore-up investors in the corruption-ridden industry that has seen increasing financial scandals over the past two years.

Accounts at brokerages' custodian banks will no longer be allowed to be frozen when institutional stock sellers fall under court control, the Shanghai Securities News said.

Suspension of investor accounts at the depository and clearing companies would be illegal as well, the court said. Brokerages' own deposit accounts and investors' accounts at firms could be frozen under certain conditions, the newspaper said without elaborating. -AFP