The China Banking Regulatory Commission (CBRC) announced on the December 13 that with the approval of the State Council, the CBRC will relax restrictions on the proportion of foreign-owned shares of Chinese banks and financial assets management companies other than private banks, allowing foreign capital to hold the same proportion of equity as domestic capital.
Fan Wenzhong, director of the International Department and the Hong Kong, Maucao and Macao Affairs Office of the CBRC, said that the core of the policy adjustment is to apply the national treatment in the ratio management of bank equity investment.
According to the current regulations, a single overseas financial institution and its related parties under its control or under jointly control shall not own more than 20 percent of the shares in a single Chinese-funded commercial bank and a financial asset management company. Multiple overseas financial institutions and their related parties under its control or under jointly control shall not own more than 25 percent of the shares in a single Chinese-funded commercial bank and a financial asset management company.
However, the CBRC also said that the implementation of the relevant opening-up policy requires the revision of the existing laws and regulations and the regulatory system as well as the establishment and improvement of the corresponding prudential supervision mechanism and supporting measures. There should be a convergence between old and new policies.
Looking back to the opening-up process of the banking industry, China’s banking sector has entered a new phase of opening since China joined in the WTO on December 11, 2001. Currently, there are no shareholding restrictions on foreign capital when setting up subsidiaries in China, or setting up joint-venture banks with Chinese partners, setting up or investing trust companies or other on-bank financial institutions except financial asset management companies.
Particularly, foreign banks can set up wholly-owned subsidiaries in China. Foreign banks have already set up 38 wholly-owned banks, including HSBC, Standard Chartered, Citigroup, JP Morgan, BNP Paribas, UBS and Mizuho. SPD Silicon Valley Bank is jointly set up by foreign capital with its Chinese partner.
Authoritative data shows that the number of foreign-funded banking institutions has steadily increased over the past decade, and the scale of operation has risen significantly. As of the end of November 2017, there were 210 foreign-funded banking institutions in China, including 39 foreign-funded banks, 17 foreign-funded new rural financial institutions, 31 foreign-funded non-bank financial institutions and 123 foreign bank branches. And another 100 bank corporate bodies have foreign investment.
Take foreign-funded banks as an example. The number of their institution above the level of branches has maintained a continuous growth trend since 2003, reaching 474 at the end of 2016, basically covering the whole country.
In recent years, with the commercialization of Chinese-funded banking financial institutions and the reform of the shareholding system, especially after the outbreak of the global financial crisis in 2008, foreign financial institutions in China has slowed down. Their market share has been gradually declining. The competition between domestic and foreign banks is changing.
Fan believes that this is the result of a combination of internal and external factor. This also sets forth new requirements for further opening up of policy. The CBRC will actively and steadily push forward the opening-up of the banking industry, rationally arrange the order of opening up, continuously improve supervision while expanding policy space and enhancing market vitality, resolutely safeguard the stability of the financial system and hold the bottom line where systemic financial risks will not occur.
"The goal of promoting the opening-up of the banking sector is to promote the more equal participation of foreign-funded financial institutions in China's banking system and financial markets, let them play a professional advantage to promote competition and stimulate market vitality." Fan said that at the same time, a more open and diversified market environment will be conducive to the active utilization and effective absorption of advanced foreign experience in Chinese-funded banking financial institutions to realize the specialized development. This will further enhance the internationalization level and core competitiveness of China's banking industry. In addition, while expanding the development space for foreign-funded financial institutions in China, the establishment of a regulatory framework that matches international rules will provide a policy environment for Chinese-funded institutions to go global.
Translated by Coral Zhong
Fan Wenzhong, director of the International Department and the Hong Kong, Maucao and Macao Affairs Office of the CBRC, said that the core of the policy adjustment is to apply the national treatment in the ratio management of bank equity investment.
According to the current regulations, a single overseas financial institution and its related parties under its control or under jointly control shall not own more than 20 percent of the shares in a single Chinese-funded commercial bank and a financial asset management company. Multiple overseas financial institutions and their related parties under its control or under jointly control shall not own more than 25 percent of the shares in a single Chinese-funded commercial bank and a financial asset management company.
However, the CBRC also said that the implementation of the relevant opening-up policy requires the revision of the existing laws and regulations and the regulatory system as well as the establishment and improvement of the corresponding prudential supervision mechanism and supporting measures. There should be a convergence between old and new policies.
Looking back to the opening-up process of the banking industry, China’s banking sector has entered a new phase of opening since China joined in the WTO on December 11, 2001. Currently, there are no shareholding restrictions on foreign capital when setting up subsidiaries in China, or setting up joint-venture banks with Chinese partners, setting up or investing trust companies or other on-bank financial institutions except financial asset management companies.
Particularly, foreign banks can set up wholly-owned subsidiaries in China. Foreign banks have already set up 38 wholly-owned banks, including HSBC, Standard Chartered, Citigroup, JP Morgan, BNP Paribas, UBS and Mizuho. SPD Silicon Valley Bank is jointly set up by foreign capital with its Chinese partner.
Authoritative data shows that the number of foreign-funded banking institutions has steadily increased over the past decade, and the scale of operation has risen significantly. As of the end of November 2017, there were 210 foreign-funded banking institutions in China, including 39 foreign-funded banks, 17 foreign-funded new rural financial institutions, 31 foreign-funded non-bank financial institutions and 123 foreign bank branches. And another 100 bank corporate bodies have foreign investment.
Take foreign-funded banks as an example. The number of their institution above the level of branches has maintained a continuous growth trend since 2003, reaching 474 at the end of 2016, basically covering the whole country.
In recent years, with the commercialization of Chinese-funded banking financial institutions and the reform of the shareholding system, especially after the outbreak of the global financial crisis in 2008, foreign financial institutions in China has slowed down. Their market share has been gradually declining. The competition between domestic and foreign banks is changing.
Fan believes that this is the result of a combination of internal and external factor. This also sets forth new requirements for further opening up of policy. The CBRC will actively and steadily push forward the opening-up of the banking industry, rationally arrange the order of opening up, continuously improve supervision while expanding policy space and enhancing market vitality, resolutely safeguard the stability of the financial system and hold the bottom line where systemic financial risks will not occur.
"The goal of promoting the opening-up of the banking sector is to promote the more equal participation of foreign-funded financial institutions in China's banking system and financial markets, let them play a professional advantage to promote competition and stimulate market vitality." Fan said that at the same time, a more open and diversified market environment will be conducive to the active utilization and effective absorption of advanced foreign experience in Chinese-funded banking financial institutions to realize the specialized development. This will further enhance the internationalization level and core competitiveness of China's banking industry. In addition, while expanding the development space for foreign-funded financial institutions in China, the establishment of a regulatory framework that matches international rules will provide a policy environment for Chinese-funded institutions to go global.
Translated by Coral Zhong
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