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10 Foreign Banks to Incorporate Locally
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More than 10 foreign-funded banks have expressed their wish to incorporate locally, a senior official with the China Banking Regulatory Commission told a press conference on Wednesday.


Xu Feng said that the commission would release the names of the first batch of foreign-invested banks who have submitted their applications soon after the Regulation on Administration of Foreign-funded Banks take effective on Dec. 11.


Xu predicted that locally incorporated banks would account for more than half of the turnover of foreign institutions in China.


Under the regulation, the Chinese government encourages foreign banks to incorporate locally and set up subsidiaries to minimize risks for Chinese customers.


If a foreign bank continued to run its Chinese operation as branches operated from overseas, the range of services it could offer customers would be limited.


China's banking watchdog said that the stipulation is in line with international practice. When liquidity risks occur, domestic customers should be given priority in withdrawing funds. Chinese individuals who deposit money in branches operated from overseas could find their assets at risk if the parent bank experienced a crisis.


In a globalized world, financial risks can be passed from one country to another. But China-registered corporate entities, which are supervised by Chinese banking authorities, will take measures to minimize risks and ensure domestic financial stability, they said.


The policy favoring Chinese corporate status also complies with WTO rules, which allow members to adopt measures of prudence when opening up the banking sector.


Prudent measures include policies that protect customers' interests, prevent risks to the bank and safeguard the stability of financial markets.


"The Chinese government will do everything it can to facilitate the conversion process, which will take one to three months," Wang Zhaoxing, assistant chairman of CBRC, said earlier.


Wang said he is confident that government departments involved -- the judicial department, the industrial and commercial administration, and the banking regulatory commission -- will work together in an efficient and well-coordinated manner.


A locally incorporated bank will not be regarded as a new institution. The date on which the foreign bank established its first branch in China will be regarded as the beginning of its operation.


(Xinhua News Agency December 6, 2006)


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