Senior representatives of about 30 overseas banks met with China's banking
industry regulator yesterday to discuss concerns over the draft administrative
rule on foreign banks.
The China Banking Regulatory Commission sent the proposed rule on the opening
up of the banking market at the end of this year to a group of foreign banks
last week for review, sources said.
People walk past an
outlet of the Bank of East Asia in Shanghai. According to China's WTO
commitment, foreign banks will be allowed to expand across the country and
extend their local currency clients from enterprises to local residents at
the end of 2006. [China Daily] |
The draft rule encourages foreign banks to locally incorporate their
businesses, instead of setting up branches, to offer renminbi business to
Chinese residents.
And the minimum registered capital for a foreign banking corporation will be
set at 1 billion yuan (US$125 million).
"I believe the regulator's initiative is in line with international practice
rather than setting restrictions on foreign banks' business expansion on the
mainland," said Raymond Yu, general manager of Bank of East Asia and head of the
bank's China Division.
He cited the example of Hong Kong-based Bank of East Asia, which has
registered corporations in the United States and Canada, where branches of
foreign banks are not allowed or are limited to certain businesses.
"Local incorporation is good for supervision a branch is more difficult for
supervisors to control risks than a subsidiary," he told reporters at the bank's
seminar on Tuesday.
However, he refused to comment further on the draft regulation. "We've
received the document about eight to 10 days ago and we would exchange views
with the regulator," he said.
Most of the banks would not comment on the issue, saying it is not the right
time as the rule has not been finalized.
They are waiting for the final version and will adjust their businesses on
the mainland accordingly.
Media reports said foreign banks are concerned the new rule stipulates that
fixed deposits taken from local residents by qualified foreign banks must be
more than 1 million yuan (US$125,000).
Zhao Xijun, a finance professor from the Renmin University of China, said
that some foreign banks may not like it, but it is in the best interests of
industry supervision.
"It is important for regulators to protect the interests of domestic
depositors and maintain the security of the country's financial system, since
China is going to open the banking sector," Zhao said.
Currently, a total of 103 foreign bank branches and seven out of the 14
foreign banking corporations are allowed to deal in renminbi business with
corporate clients in 25 cities.
According to China's WTO commitment, foreign banks will be allowed to expand
across the country and extend their clients from enterprises to local residents
at the end of 2006.
In some foreign countries, the well-established deposit insurance system
could protect depositors' interests if any banking institution has operational
risks or goes bankrupt.
However, China has not established such an insurance system and therefore
stricter supervision and higher entrance requirements are needed, Zhao said.
(China Daily 08/24/2006 page9)
