If a foreign bank intends to enter into Chinese market, they need to follow PRC laws and regulations in respect of formation of a foreign bank, branch or representative office in China. PRC government has promulgated multiple laws and regulations regarding formation, management and operations of a foreign bank or non-bank financial institutions. Today I would like to address the qualification of a foreign bank intending to establish a bank, branch or representative office in China.
China promulgated
PRC Regulations on Management of a Foreign Bank
(“RMFB”)in 2006, which become effective on December 11, 2006, to provides for the requirements on qualification of a foreign bank intending to set up a bank, branch or representative office in China. Generally speaking, a foreign bank, as a shareholder, should satisfy the following requirements:
(1) it has sound credit reputation and good prospects as an ongoing concern, and has no record of material violation of laws and regulations;
(2) it has intense experience in engaging in international financial activities;
(3) it has sound and effective system regarding anti-money laundering;
(4) it has been submitted itself to the effective supervision by the relevant authority in a country where the foreign bank was duly established and operated, and obtained the approval from the aforesaid authority for their application to set up a branch in China; and
(5) other requirements as provided for by China Banking Regulatory Commissions.
In addition to the aforesaid general requirements, the foreign bank also needs to meet the following conditions:
(1) In the event that the foreign bank(s) intends to set up a wholly-foreign-owned bank in China, the sole shareholder or de factor controlling shareholder should : (a) be commercial banks; (b) has an existing representative office in China over at least two years; (c ) has the total assets which should not less than 10 billion USD at the end of one year before making application for establishment of its wholly-foreign-owned bank in China; and (d) meet the requirements on capital adequacy ratio as required by local banking regulatory body.
(2) In the event that the foreign bank(s) intends to set up a joint venture bank with Chinese bank(s), the foreign bank should (a) be commercial banks; (b) already has an existing representative office in China; (c ) has the total assets which should not less than 10 billion USD at the end of one year before making application for establishment of its wholly-foreign-owned bank in China; and (d) meet the requirements on capital adequacy ratio as required by local banking regulatory body.
(3) In the event that the foreign bank intends to set up a branch in China, the foreign bank should : (a) has the total assets which should not less than 20 billion USD at the end of one year before making application for establishment of its branch in China;(b) meet the requirements on capital adequacy ratio as required by local banking regulatory body; and (c) has an existing representative office in China over at least two years if the to-be-formed branch is their first branch in China.
By Adam Li