Overseas banks granted respite on loans ratio
Shanghai Daily news
China has granted overseas
banks a five-year grace period to comply with a loan-to-deposit requirement
ratio of less than 75 percent in a new implementation rule released
Foreign banks that incorporate locally have to meet the
requirement by December 31, 2011, the China Banking Regulatory Commission said
yesterday on its Website.
The watchdog made the new implementation rules on
foreign banks in line with a rule released on November 16, stipulating that
overseas banks that want access to a full array of retail yuan business have to
incorporate locally with a registered capital of no less than one billion yuan
If not, they can hold a single deposit of more than one
million yuan, shutting the door on many small-capital clients.
implementation rules take effect on December 11, when China's US$5.2 trillion
banking sector is opened under the country's World Trade Organization
The loan-to-deposit ratio issue triggered debate among overseas
banks when the authority released a draft to hear foreign players'
Overseas banks complained it was hard for them to comply with the
requirement - which domestic banks also have to obey - as soon as they enter the
Overseas banks' deposits lag far behind their loans as they are
banned from the retail yuan business until December 11. Their loan-to-deposit
ratios are estimated to sit at 200 percent to 300 percent.
A break has been
expected in the industry.
The Hang Seng Bank said earlier it would not take
it long to meet the requirement as its deposits would grow dramatically once the
retail yuan business was opened.
Yesterday's rule also gave overseas players
a three-year break before they are prevented from lending more than 10 percent
of their capital to a single client.
The capital a locally incorporated
foreign bank lends to a single client cannot exceed 10 percent from December 31,
2009. Before that the cap is loosened to 25 percent for a single client or