Circular on the Further Relaxation of Market Access for Foreign Banks (Mainland China)

Joline Chen

To further expand the opening up of the banking industry and increase the convenience of foreign banks’ business operations, the General Office of the China Banking Regulatory Commission has issued the Circular on the Further Relaxation of Market Access for Foreign Banks (the “Circular”).  The Circular is highlighted below:

1. The Circular stipulates that branches of foreign banks, wholly foreign-owned banks, and Sino-foreign joint venture banks can engage in providing issuance and payment services, as well as underwriting government bonds without an administrative approval from the banking regulatory agency of the State Council. They shall report to the regulatory agency within five working days after engaging in the above businesses.

2. The Circular clarifies that for a foreign bank that has established several branches in China, if the managing bank has been approved to conduct RMB and derivatives trading, it may authorize the branches to conduct such businesses after it has assessed and ensured that they meet the required conditions. Branches that have been authorized to conduct RMB business by their managing bank shall complete all the preparatory work and report to the local agency of the banking regulatory authority of the State Council before commencing the RMB business. For derivatives trading, branches authorized by the managing bank to launch derivatives trading shall first meet the relevant requirements for derivatives trading, then report to the local agency of the banking regulatory agency of the State Council and provide the authorization document issued by the managing bank and the materials required before the derivatives trading business may be launched. 

3. The Circular stipulates that working capital allocated by foreign banks to their domestic branches in China shall be jointly calculated. When additional branches are established, if the jointly calculated working capital meets the minimum and the regulatory indicator requirements, the foreign bank may authorize the domestic branches in China to distribute working capital to the additional branches.

4. The Circular stipulates that wholly foreign-owned banks, Sino-foreign joint venture banks, and foreign bank branches shall strengthen their institutional development, system development, compliance management and risk control, and improve the level of comprehensive financial services.  The managing bank of a foreign bank in China should strengthen the management of its other branches in China.  In case of major issues, a report shall be filed with the regulatory agency in a timely manner.