Mon, Dec 22, 2014 - Page 15 News List

China loosens red tape restrictions on foreign banks


China has cut red tape for foreign bank branch openings and entry into yuan business, state media said on Saturday, the latest in a series of measures to liberalize the banking sector.

The Cabinet revised existing rules, abolishing the requirement for foreign-owned and joint-stock banks to inject 100 million yuan (US$16.08 million) or an equivalent in other currencies of working capital into a newly opened branch, Xinhua news agency reported.

This should speed up the approval process, the agency said.

The revisions also lower the threshold for foreign banks to enter the yuan business.

The Cabinet has cut the number of years a bank has to be registered before it conducts yuan business from three to one, and scrapped a two-year profitability requirement.

Banks now no longer have to first establish a Chinese representative office before setting up other branches.

Under the new rules, branches of a foreign bank will not face obstacles to carrying out yuan business if it already has one branch doing so.

The rules are to take effect on Jan. 1.

Experts told the news agency the revisions put foreign banks on an equal footing with local lenders.

“These rules are aimed at bringing more competition to the banking industry and expanding the opening-up policy,” Dragon Life Insurance Co (正德人壽) fund manager Wu Kan (吳侃) said.

“By doing so, China is also preparing for an internationalization of the renminbi,” Wu said, referring to the Chinese currency also known as the yuan.

China has been working to liberalize its financing sector, widening the band for bank deposit rates late last month and allowing brokerages to trade in the interbank foreign exchange market this month.

On Saturday, People’s Bank of China Deputy Governor Pan Gongsheng (潘功勝) said at a conference in Beijing that China would move ahead with deregulation of interest rates to make its financial system more competitive and more comprehensive, as well as build a multilayered capital market.

Additional reporting by Bloomberg

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