China Relaxes Market Access Standards for Foreign Capital Banks

Strategic Insights -

The China Banking Regulatory Commission (CBRC) has introduced revised Implementing Rules that will loosen market access standards for foreign capital banks operating in China. The new rules will take effect on September 1 this year and are aimed at reducing operating costs and promoting the healthy development of foreign banks in China. According to the revised rules, the minimum operating capital required for foreign bank branches to operate Renminbi business with Chinese capital enterprises and Chinese resident individuals will be lowered to 300 million yuan (US$36.22 million) and 500 million yuan respectively.

Key Takeaways:

  • The revised Implementing Rules will reduce the minimum operating capital required for foreign bank branches in China from 400 million yuan to 300 million yuan for operating with Chinese capital enterprises and from 600 million yuan to 500 million yuan for operating with Chinese resident individuals.
  • The grades of operating capital for solely foreign-funded banks and joint venture banks in China will be simplified from six to three, with lower operating capital requirements.
  • The new rules will allow foreign capital banks to buy and sell Chinese and foreign government bonds, bonds issued by Chinese financial institutions, and foreign currency securities other than stocks.
  • The one-year interval requirement for foreign banks to add new branches after an initial application for organizational establishment has been rejected has been deleted.
  • Foreign capital banks are now required to accrue reserve against loan loss and new shareholders must comply with conditions set in the Regulations on the Administration of Foreign Capital Financial Institutions.

Statistics:

  • The minimum operating capital required for foreign bank branches in China will be reduced to 300 million yuan (US$36.22 million) for operating with Chinese capital enterprises.
  • The minimum operating capital required for foreign bank branches in China will be reduced to 500 million yuan for operating with Chinese resident individuals.
  • The grades of operating capital for solely foreign-funded banks and joint venture banks in China will be simplified from six to three.
  • 400 million yuan
  • 600 million yuan
  • 300 million yuan
  • 500 million yuan

Sources:

  • China Banking Regulatory Commission (CBRC)
  • Xinhua International Communications Group (XIC)