Nine foreign banks received permission to become the first international lenders to incorporate in China under World Trade Organization market-opening pledges.
December 24, 2006 (Press Release) --
Nine foreign banks took a key step Sunday toward breaking into the Chinese retail banking industry, receiving permission to become the first international lenders to incorporate in China under World Trade Organization market-opening pledges.
The banks' local units, once incorporated, will be able to take the final step of applying for retail licenses to compete with Chinese banks in handling the local currency, the yuan, the China Banking Regulatory Commission said.
Foreign banks are eager to break into China's retail market, which has 30 trillion yuan (US$4 trillion; €3 trillion) in household savings and surging demand for credit cards and other financial services as incomes rise. China's own banks are racing to modernize in preparation for the influx of competition.
The foreign banks granted permission to incorporate are Citigroup Inc. of the United States, Japan's Mizuho Corporate Bank and Sumitomo Mitsui Bank, Britain's HSBC Corp. and Standard Chartered PLC, Dutch bank ABN Amro Holdings NV, Singapore's DBS Bank, and Hong Kong's Bank of East Asia and Hang Seng Bank, the CBRC said on its Web site.
They represent 55 percent of total assets held by foreign banks in China, the agency said.
Foreign institutions should be able to capture higher-end retail and corporate business in major cities, industry analysts say. But they say changes are likely to be gradual. China's major commercial banks are less experienced than foreign rivals but have huge asset bases and established nationwide branch networks.
Some 71 foreign banks are represented in China but most were limited until now to handling foreign currency business. Most are not expected to set up Chinese branch networks due to the high cost, and are expected to operate through local partners.
The CBRC's announcement came two weeks after the agency said it had received their applications. It did not say how long it would take the banks to win approval for retail licenses.
China issued rules Dec. 11 that in theory lift geographic and client restrictions on foreign banks' operations. Previously foreign banks were allowed to offer Chinese-currency services on a limited scale in 20 major cities. But they still must meet Chinese regulatory requirements to set up retail networks.
The government says foreign banks are required to commit at least 1 billion yuan (US$125 million; €100 million) in registered capital to their Chinese units and to capitalize each branch with 100 million yuan (US$12 million; €10 million).
HSBC, Citigroup and others including Bank of America Corp. have spent billions of dollars to prepare to buy stakes in Chinese partners and set up credit card and other ventures.
Foreign banks still face regulatory obstacles to expanding.
Chinese regulations block them from taking over a Chinese bank under most circumstances. Foreign ownership of a Chinese bank is limited to 25 percent, with no more than 20 percent held by a single entity.
Most foreign banking activity is centered in Shanghai, the mainland's business center, which accounts for 55 percent of total foreign banking volume, according to government figures.
Nationwide, foreign banks have a total market share of less than 2 percent.
Source: http://www.iht.com/
The banks' local units, once incorporated, will be able to take the final step of applying for retail licenses to compete with Chinese banks in handling the local currency, the yuan, the China Banking Regulatory Commission said.
Foreign banks are eager to break into China's retail market, which has 30 trillion yuan (US$4 trillion; €3 trillion) in household savings and surging demand for credit cards and other financial services as incomes rise. China's own banks are racing to modernize in preparation for the influx of competition.
The foreign banks granted permission to incorporate are Citigroup Inc. of the United States, Japan's Mizuho Corporate Bank and Sumitomo Mitsui Bank, Britain's HSBC Corp. and Standard Chartered PLC, Dutch bank ABN Amro Holdings NV, Singapore's DBS Bank, and Hong Kong's Bank of East Asia and Hang Seng Bank, the CBRC said on its Web site.
They represent 55 percent of total assets held by foreign banks in China, the agency said.
Foreign institutions should be able to capture higher-end retail and corporate business in major cities, industry analysts say. But they say changes are likely to be gradual. China's major commercial banks are less experienced than foreign rivals but have huge asset bases and established nationwide branch networks.
Some 71 foreign banks are represented in China but most were limited until now to handling foreign currency business. Most are not expected to set up Chinese branch networks due to the high cost, and are expected to operate through local partners.
The CBRC's announcement came two weeks after the agency said it had received their applications. It did not say how long it would take the banks to win approval for retail licenses.
China issued rules Dec. 11 that in theory lift geographic and client restrictions on foreign banks' operations. Previously foreign banks were allowed to offer Chinese-currency services on a limited scale in 20 major cities. But they still must meet Chinese regulatory requirements to set up retail networks.
The government says foreign banks are required to commit at least 1 billion yuan (US$125 million; €100 million) in registered capital to their Chinese units and to capitalize each branch with 100 million yuan (US$12 million; €10 million).
HSBC, Citigroup and others including Bank of America Corp. have spent billions of dollars to prepare to buy stakes in Chinese partners and set up credit card and other ventures.
Foreign banks still face regulatory obstacles to expanding.
Chinese regulations block them from taking over a Chinese bank under most circumstances. Foreign ownership of a Chinese bank is limited to 25 percent, with no more than 20 percent held by a single entity.
Most foreign banking activity is centered in Shanghai, the mainland's business center, which accounts for 55 percent of total foreign banking volume, according to government figures.
Nationwide, foreign banks have a total market share of less than 2 percent.
Source: http://www.iht.com/
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