Beyond COVID-19: Crisis response or road to recovery?
Crisis response or road to recovery?
After almost a year since the draft revised Regulations on the Administration of Foreign Invested Bank1 (the Regulations) were published for public comment, the formal Regulations were promulgated on October 15, 2019.
The formal version of the Regulations does not differ very much from the previous draft, but compared to the 2014 version, there are quite a number of notable changes that liberalize restrictions on foreign investment in the retail banking sector in China.
The new Regulations no longer require the sole/principal Chinese shareholder of a joint venture bank to be a financial institution, although the sole/principal foreign shareholder must still be a commercial bank. This change provides foreign investors with a wider choice of Chinese joint venture partners.
The previous requirement for a foreign investor to have total assets of not less than:
no longer applies.
The removal of this requirement is good news for smaller sized foreign banks looking to enter the Chinese market.
The new Regulations have removed the single presence restriction and now allow a foreign bank to set up:
In addition, it is no longer a requirement for the branch’s business to be limited to wholesale banking.
These recent developments are very encouraging and will hopefully result in more foreign banks (in particular banks that are smaller and innovative) entering into or expanding their business in the China retail banking market. However, it remains to be seen how these new Regulations are implemented in practice and it is expected that implementation rules in respect of the new Regulations will be issued in order to provide more clarity and practical guidance on these key reforms.
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