The China Banking Regulatory Commission is to accept the applications of eight foreign banks for local incorporation, following the introduction of the People's Republic of China's regulations on the administration of foreign-funded banks.
China issued these new regulations and the rules for implementation of the regulations as part of its requirements for entry into the World Trade Organization, which stated that the country had to open its banking sector to overseas competition. The transition period concluded on December 11, 2006 and, as a result, the new regulations have come into effect.
Under the rules and regulations, which encourage foreign-funded banks to incorporate locally on a commercial and volunteer basis, the regional and client restrictions on foreign-funded banks’ domestic renminbi business shall be released, and these banks will enjoy national treatment under prudential principles.
The rules state that foreign banks that want local incorporation must have paid-in capital of one billion yuan ($188 million) and must have been operating their business for at least three years and have been profitable for two years prior to the application.
The China Banking Regulatory Commission (CBRC) has received conversion applications from HSBC, Citigroup, Standard Chartered Bank, Bank of East Asia and ABN Amro, among others, to turn their operations in China into locally registered corporations.
If the applications are approved by the CBRC, the foreign banks will be allowed to engage in full-scale renminbi, or yuan, business.