Banking News
- 8 banks apply for retail licenses
Date: 12-Dec-2006 Sources: (Shenzhen Daily)
EIGHT foreign banks have applied to become the first foreign institutions licensed to handle retail business in Chinese currency, the government said, as a WTO deadline for opening its banking market passed yesterday.
Some 71 foreign banks are represented in China but most were limited to handling foreign currency business. The government agreed to open the market as part of its World Trade Organization membership obligations. Its own banks have been racing to modernize in preparation for facing foreign competitors.
Industry analysts expect foreign banks to be able to grab some higher-end retail and corporate business in major cities.
Banks that have applied for retail licenses are Citigroup Inc. of the United States, Japan's Mizuho Corporate Bank, Britain's HSBC Corp. and Standard Chartered PLC, Dutch bank ABN Amro Holdings NV, Singapore's DBS Bank and Hong Kong's Bank of East Asia and Hang Seng Bank, according to the Web site of the China Banking Regulatory Commission.
HSBC, Citigroup and others including Bank of America Corp. have spent billions of dollars to prepare for the market opening, buying stakes in Chinese partners and setting up credit card and other ventures.
China's major State-owned commercial banks have also raised billions of dollars to finance their own modernization by selling shares on foreign markets over the past two years.
Foreign competitors want a share of a market with some US$4 trillion in household savings and growing demand for financial services.
Rules that took effect yesterday give them access to the local currency retail banking business, in theory lifting all geographic and client restrictions on operations. Previously foreign banks were allowed to offer such services on a limited scale in 20 major cities.
But foreign banks still must meet Chinese regulatory requirements to conduct retail business. They face some regulatory obstacles to expanding in China. Foreign ownership of a Chinese bank is limited to 25 percent, with no more than 20 percent held by a single entity.
The government has granted only one exception to that rule. A group led by Citigroup received approval last month to buy 85.6 percent stake in Guangdong Development Bank for 24.3 billion yuan (US$3 billion).
And the biggest Chinese banks have extensive branch networks and substantial assets.
The biggest State-run bank, Industrial and Commercial Bank of China Ltd., has 18,000 branches and deposits totaling some 6 trillion yuan. The bank raised US$21.2 billion with an initial public offering in October in Hong Kong and Shanghai.
Much of the foreign banking business is centered in Shanghai, the mainland's international business center. The city accounts for 55 percent of total foreign banking volume and 30 percent of all outlets, according to government figures.
Nationwide, foreign banks have a total market share of less than 2 percent.
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