Advanced Search
Business | Metro | Nation | World | Sports | Features | Specials | Delta Stories
Eight foreign banks apply to operate locally
11/12/2006 16:10

Shanghai Daily news

China's banking watchdog is set to accept eight foreign banks' applications to incorporate in Shanghai today - marking the day China's new regulation to allow foreign banks into the Chinese retail market takes effect, the banking industry regulator said.

The first batch of foreign-invested banks includes HSBC Holdings Plc, Citigroup Inc, Standard Chartered Bank, Bank of East Asia, Hang Seng Bank, DBS, ABN AMRO and Mizuho Corporate Bank.

It is not surprising that they all choose Shanghai, according to the Shanghai Banking Regulatory Bureau. By the end of September this year, there had been totally 30 branches of foreign banks in the city, with another two branches and seven sub-branches being established. To date, foreign banks in the city registered nearly US$60 billion in total assets, covering more than half of those in China.

The China Banking Regulatory Commission will decide whether the applications are approved or not.

Under the new regulation, the Chinese government encourages foreign banks to incorporate locally and set up subsidiaries to minimize the risks for Chinese customers.

The regulation, which was released on November 16, stipulates 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 (US$127 million).

Another regulation issued on November 28 granted overseas banks a five-year grace period to comply with a loan-to-deposit requirement ratio of less than 75 percent.

Foreign banks that incorporate locally have to meet the requirement by December 31, 2011, according to the commission.

Overseas banks' deposits lag far behind their loans as they were banned from the retail yuan business until today, when China's US$5.2 trillion banking sector opened under the country's World Trade Organization commitment.

Their loan-to-deposit ratios are estimated to sit at 200 percent to 300 percent.

If a foreign bank continued to run its Chinese operations as branches operated from overseas, the range of services it could offer customers would be limited. China's banking watchdog said that the stipulation is in line with international practices.

A locally incorporated bank will not be regarded as a new institution. The date on which the foreign bank set up its first branch in China will be regarded as the beginning of its operation.

Xu Feng, a senior official with the Commission, predicted that locally incorporated banks would account for more than half of the turnover of foreign institutions in China.