Banking News
- Banks to have 5 years for new rules
Date: 24-Nov-2006 Sources: (Shenzhen Daily)
THE government will soon flesh out details on how it will ease the pain for foreign lenders wishing to incorporate as local entities to access the nation's retail banking market, the China Daily and bankers said Thursday.
The China Daily said the banking regulator would give locally incorporated foreign banks a grace period of five years before they must meet stringent requirements on the amount of deposits they must hold in order to extend loans.
Citing draft amendments to revised rules governing foreign banks, which were issued last week, the English-language paper said the details would likely be released by the end of November.
Western bankers in China said officials had floated the idea of giving foreign banks an extended grace period on the loan-to-deposit ratio imposed on Chinese lenders, if they wished to transform from foreign branches into local entities.
According to the bank rules, foreign lenders must incorporate and respect the regulatory norms adhered to by domestic banks if they wish to gain full access to the retail banking market, which includes some US$2 trillion in household deposits.
'We understand that there will be measures to help us through the transition because the government is encouraging us to incorporate locally,'said one senior banker based in Shanghai.
Detailed implementation guidelines were expected to be unveiled in the coming weeks, she said.
Foreign banks have been able to extend yuan loans to companies in China.
But they will only be able to lend to ordinary Chinese citizens once they secure approvals to do so after Dec. 11, the end of a five-year transitional period for China to implement its World Trade Organization promises.
Until now, some foreign banks operating in China have been running loan books in multiples of their customer deposits.
Incorporated lenders would also be given a grace period of three years before being required to lend no more than 10 percent of the value of their capital to a single client, the paper said.
Currently, overseas banks cannot not lend over 25 percent of their capital to a single client, it said.
A number of foreign banks have declared their intention to incorporate in China, a move which requires them to set aside 1 billion yuan (US$127 million) in registered capital.
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