On 27 April 2018, the China Banking and Insurance Regulatory Commission (CBIRC) issued the Notice on Matters Related to Further Relaxing Market Access for Foreign Banks (关于进一步放宽外资银行市场准入有关事项的通知), which follows a series of recent announcements aimed at easing foreign investment restrictions in the financial sector.
The CBIRC was created through the merger of China's banking and insurance regulators under the State Council institutional reform plan announced in March 2018.
Key measures in the notice include:
• A foreign bank's China branch, or a wholly foreign-owned bank, or a Sino-foreign joint venture bank may act as an agent for the issuance, acceptance and underwriting of government bonds (including bonds issued in China by foreign governments) without prior administrative approval, provided the bank acts lawfully and reports to its regulator within five business days after commencing business.
• Where a foreign bank has multiple branches in China and the branch that performs administrative functions for the group in China is approved to engage in Renminbi or derivatives business, the other branches also may engage in that business, provided the administrative branch assesses the qualifications of the other branches, authorises the qualified branches, completes related preparatory work, and reports to the competent local office of the CBIRC in advance.
• The minimum capitalisation requirements applicable to a foreign bank will be treated on a consolidated basis; when a new branch is established and where the aggregate capital allocated by a foreign bank to all branches in China meets the legal requirements, the foreign bank may authorise one or more of its domestic branches to allocate working capital to the new branch.
Shirley Wang, Partner, Zhong Lun Law Firm, Beijing: "Following other recent policies and announcements in the financial sector, the CBIRC's latest notice is a solid step forward in further opening China's finance industry market and more foreign banks are expected to expand their presence or business activities in the sector."
GC for foreign banks with China branches, wholly foreign-owned banks and joint venture banks will want to closely study the notice (and possibly seek specialist advice) before advising senior management on the opportunities presented by the notice and related rules.