This content is from: Local Insights

Foreign-funded banks

The deadline for opening all types of renminbi banking business to foreign banks under China's WTO commitments is December 10 2006. But local branches of foreign banks dealing with renminbi businesses for Chinese domestic entities will not automatically be granted with renminbi retail business licences. Foreign banks will need to incorporate a wholly foreign-owned bank in China to obtain an overall renminbi business licence.

The State Counsel has just issued a new Administrative Regulation on Foreign-funded Banks, which will become effective December 11 2006. Under the new Regulation, a foreign bank could apply to the China Banking Regulatory Commission to establish a wholly foreign-owned banking corporation by transferring its existing local branches into the new corporation. The China regulatory authorities will encourage setting up a wholly foreign-owned bank in China as an independent Chinese legal entity, and the entity will benefit from much more favourable treatment than local branches of foreign banks. For example, the new Regulation allows a locally incorporated foreign-funded bank to carry on banking card business, while this is not listed in the scope of business of local branches of a foreign bank.

The new Regulation will replace the older version of the Administrative Regulation on Foreign-funded Financial Institutions issued five years ago. The Regulatory Commission is expected to issue procedures for setting up a wholly foreign-owned bank by transferring existing branches into it soon.

Wang Ling

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