In a bid to further liberalise the financial services sector, China is enabling foreign bank branches access to fund custody business.
The new rules have been jointly issued by the CSRC (China Securities Regulatory Commission) and CBIRC (China Banking and Insurance Regulatory Commission).
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Under the new rules, local branches of foreign banks in China can apply for a fund custody licence, a thing which was not allowed previously.
Earlier the rules only allowed foreign banks’ local subsidiaries to secure such a licence. In 2018, Standard Chartered Bank received such a licence in a first for a foreign bank.
The new rules allow local branches of foreign banks in China to secure such a licence, albeit with some eligibility criteria including sound internal control mechanisms and operating performance, as well as the scope of the fund custody business.
Profit and market share for the past three years will also be key indicators for the applicants.
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By GlobalDataApplicants should have net assets of over CNY20bn (around $2.86bn).
The civil liability of the Chinese branches will remain with the headquarters of foreign banks.
The headquarters should be responsible for implementing a liquidity support mechanism commensurate with the scale of the China fund custody business.
Several banking groups have made inroads into China after the opening up of the market.
JPMorgan recently secured the regulatory nod to operate the first entirely foreign-owned futures business in the country.
Besides, the bank received the final regulatory nod to open its majority-owned securities joint venture (JV) in China.
Goldman Sachs and Morgan Stanley also received regulatory approval to pick majority stake in their China securities JVs.
Similarly, Credit Suisse completed the deal to acquire a majority stake in its China securities JV.
In another move aimed at financial sector liberalisation, China lifted quota limits for QFII and RQFII.
