Under the draft of the revised regulation on foreign banks, which was released by the China Banking and Insurance Regulatory Commission (CBIRC), the country’s top banking watchdog, on Thursday, a foreign bank will be allowed to set up a fully-foreign-owned bank or a joint-venture bank in China in addition to its branch office in the country, a provision intended to provide foreign banks with more market access.
Meanwhile, the new regulation halves the minimum amount of fixed-deposit that a foreign bank could accept from a Chinese resident at a time from the current 1 million yuan (about 143,000 U.S. dollars) to 500,000 yuan (about 72,000 U.S. dollars), making it much easier for foreign banks to develop their deposit business in China.
The new regulation also helps foreign banks diversify their revenue sources by allowing them to act as intermediaries in the issuance and sale of China’s government bonds.
Given that foreign banks tend to attach more importance to risk control, the new regulation also takes a more flexible approach to foreign banks’ risk management practices when compared with the existing rule.
Dong Ximiao, senior fellow at the Chongyang Institute for Financial Studies, Renmin University of China, said that by gradually widening market access for foreign banks, China could not only usher in more financial products, technologies, and talent into the Chinese market but also bring more competition to its banking industry.
“Domestic banks will become more competitive through the competition with their foreign counterparts,” he said. “The whole banking industry will also benefit from such competition.”
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