Foreign banks' applications get nod

By Zhang Lu (China Daily)
Updated: 2006-12-11 06:56

China's banking regulator will accept the application of eight foreign banks for local incorporation today, the China Banking Regulatory Commission (CBRC) said yesterday on its website.

Following the issuance of the new Regulations on Administration of Foreign-funded Banks, HSBC, Citigroup, Standard Chartered Bank, Bank of East Asia, Hang Seng Bank, Mizuho Corporate Bank, DBS Bank and ABN AMRO have applied to turn their operations in China to locally registered corporations, CBRC said.

The new rules, in line with China's commitment to the World Trade Organization, allow foreign-funded banks to deal in the renminbi retail business across the country from today.

With a prudential supervision principle, the rules are encouraging foreign banks to incorporate locally when doing renminbi retail business.

China encourages foreign banks to invest in regions where financial services are relatively weak, said CBRC officials.

"The CBRC has adopted some preferential policies, encouraging foreign banking institutions to set up operations in the central, western and northeastern regions," said Deng Zhiyi, deputy director of the CBRC department that oversees State-owned commercial banks.

"We may further adjust the policies, to expand into other regions with insufficient financial resources," Deng said on Friday.

According to him, the banking regulator is drawing up a map of the country's financial services, based on a recent nationwide sample survey.

Questions in the survey include: "Do you find the current banking network convenient?" "Is the current banking services convenient for small local enterprises to get bank loans?"

The map will show where financial services are already saturated and where they are inadequate.

And the banking regulator may also adjust its supervision policies, like the entrance requirements of banking institutions, Deng said.

Duan Jining, deputy director of the CBRC department that oversees foreign banks, said starting two years ago, the regulator gave priority in terms of approval to foreign banks applying to set up operations in the central, western and northeastern regions.

Such a "green pass" is applicable in the Binhai New Area in Tianjin, North China, in line with the central government's decision to promote the area as a new engine of growth.

There is also a preferential policy for the approval of a foreign bank's renminbi business operations in the above mentioned areas.

The general requirement for foreign outlets to conduct renminbi business is that they have to be in operation for at least three years and have made profits in the past two consecutive years.

"We look at the bank's overall performance in China, rather than the individual outlet in the city where it applies for," said Duan.

It is believed that due to the relative underdevelopment of these regions, it is much more difficult for banks to turn a profit in a short period.

The CBRC in recent months has organized study tours for foreign banks to the central, western and northeast cities like Wuhan, Xi'an, Chengdu and Shenyang.

"Through the study tours, foreign banks found there were business opportunities in these less developed regions and showed their willingness to expand to these regions," said Duan.

(China Daily 12/11/2006 page2)

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