Beijing late Wednesday revealed new rules that will open up the banking sector to foreign lenders, giving them full access to the yuan retail market.The rules, announced on the government's Web site, call for local units of foreign lenders to be incorporated in the mainland before they are allowed to offer services to the general public.
If not incorporated in China, the banks will be allowed to lend to only corporate customers and each of their depositors must have at least one million yuan (HK$989,900) in their accounts.
Foreign banks need to have total assets globally of not less than US$10 billion (HK$78 billion) one year before their subsidiaries apply for incorporation. A foreign bank's China subsidiary is required to have a minimum registered capital of one billion yuan and maintain a loans-to-deposit ratio below 75 percent.
China Banking Regulatory Commission chairman Liu Mingkang will outline the rules to foreign lenders today before meeting a delegation led by Hong Kong Association of Banks chairman Peter Wong Tung-sing. The rules are effective from December 11.
Wong, also executive director of Hongkong and Shanghai Banking Corporation, said the bank wanted to incorporate as an individual legal entity if rules permit. But he declined to comment on how long the procedure will last and how much capital the lender will inject into the new entity.
Between five and 10 foreign banks, including HSBC (0005), are expected to be among the first batch to get th
eir units incorporated in China. The other four are Hang Seng Bank (0011), Bank of East Asia (0023), Standard Chartered and ABN Amro.
Foreign bank subsidiaries incorporated in the mainland will be permitted to take deposits and lend in yuan, buy government bills and bonds, offer foreign-exchange and credit-card services and serve as agents to sell various insurance products to the public.
Hong Kong Monetary Authority chairman Joseph Yam Chi-kong led a delegation of bankers to meet with Vice Premier Huang Ju in Shanghai Wednesday.
But the delegates failed to get a clear picture of what privileges foreign lenders will be entitled to according to the World Trade Organization agreement under which China is opening up its banking sector from December 11.
"The [rules] are no surprise for us as the central bank had conducted three rounds of meetings with us [the foreign banks] earlier," said a source at a foreign bank that is keen to incorporate its mainland subsidiary as soon as possible.
Meanwhile, Citigroup, the biggest US financial-services company, is to sign an agreement today to take a controlling 20 percent stake in China's Guangdong Development Bank for about US$3 billion, becoming the first foreign lender to benefit from the rules, two people with knowledge of the decision told Bloomberg News.
