How complex regulations are disrupting banking relationships
Four out of 10 banks have terminated correspondent...
The China Banking Regulatory Commission (CBRC) further liberalized regulations for global banks’ onshore entities with a raft of changes on March 10, with the issue of Circular No. 12, forming part of China’s bid to open its financial markets to overseas institutions.
The circular allows global banks’ onshore entities, including wholly owned foreign banks, joint-ventures, and their onshore branches, to underwrite Chinese government bonds, run custodian businesses and provide financial advisory services without submitting applications to the CBRC. Banks are only required to report to regulators within 5 days once they start providing the relevant services.
Onshore entities are also able to collaborate with their global parent group and provide integrated financial services including bond issuance, IPOs, M&As, and financing in offshore markets. Global banks’ onshore entities need to specify their roles and profit allocation with their parent group and submit their annual business reports to Chinese regulators at the end of Q1 each year. In addition, global banks are also allowed to invest in onshore banking institutions.
China has committed to opening its financial markets to overseas institutions over the past few years. China has recently announced its plans to introduce a bond trading link between Hong Kong and the mainland by year-end, which allows international and mainland investors direct access to each others’ markets.
“We will continue to step up opening-up, which is a gradual process. In retrospect, we have been moving forward with the process over the past few decades,” says premier Li Keqiang at a press conference on March 15.
“Streamlining administration, the integration of control and decontrol, and the regulation and improvement of government services form an integral whole. The government needs to improve its oversight during and after the process and provide better services for businesses and the people. When market access is widened, the government needs to ensure a fair playing field for all market entities.”
Photo of Beijing Financial Street with CRBC building by TonyV3112/Shutterstock.com
17 Mar 2017