Transcript Building A Safe and Sound Banking Sector In China

China Banking Regulatory System And
Sustainable Business Development Of Foreign
Banks In China
WANG YAN XIU
Deputy Director-General
Banking Supervision Department III
China Banking Regulatory Commission
May, 2005
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Outline of CBRC
Why CBRC
– Separate banking supervision function from the
PBC, to enable the PBC focus on monetary policy
& its implementation;
– Enhance independence, specialization,
effectiveness and authority of banking supervision
– Establish a comprehensive mechanism among
CBRC, CSRC and CIRC to form a teamwork to
prevent financial risks.
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Outline of CBRC
Objectives
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Protect the interests of depositors and consumers through
prudential and effective supervision;
Maintain market confidence in China’s financial system
through prudential and effective supervision;
Promote public awareness and understanding of modern
finance through customer education and information
disclosure; and
Reduce financial crime and maintain financial stability.
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the major responsibilities of CBRC
• formulate supervisory rules and guideline for banking
institutions
• authorize and terminate business of banking
institutions
• conduct fit and proper tests for banking directors
• conduct off-site surveillance and on-site examinations
of banking institutions
• perform other duties assigned by the State Council.
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Legislation of CBRC
• Law of PRC on banking regulation and
supervision
• Administrative rule governing the financial
licence
• Administrative rule governing the Auto financing
Company
• Provisional rule on the pricing of Services by
Commercial Banks
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China’s banking sector
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At the end of 2004, China’s banking sector
comprised
four wholly State-owned commercial banks
three policy banks,
eleven joint-stock commercial banks
four asset management companies
112 city commercial banks
723 urban credit cooperatives
34,577 rural credit cooperatives
30 thousand postal saving institutions.
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Foreign Bank Operation in China
by the end of 2004
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Foreign banks branches and sub-branches 186
Wholly foreign owned bank and sub-branches 16
Joint venture banks 5
Foreign finance company 4
Total operational entities 211
Representative office 220
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Licensing Standards:
Representative Offices
• Sound home supervision
• Licensed financial institutions by home
financial authorities
• Good performance
• sound management
• compliance
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Licensing Standards: Branches
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Sound home supervision
Approval by home supervisor
Total assets no less than US$ 20 billion
Capital Adequacy Ratio no less than 8%
Representative offices established in China
for more than 2 years
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Business: Foreign Banks
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Deposits
Loans and advances
Bills acceptance and discounting
Trading in government bonds, financial bonds, and other non-equity
securities in foreign exchange
Letter of credit and guarantee
Domestic and international settlement
Trading in foreign exchange as principle and broker
Exchange in foreign currency
Inter-bank borrowing and lending
Bank cards
Safekeeping service
Credit investigation and consultancy
Other businesses approved by CBRC
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Eligibility of Senior Management
Essential requirements for Subsidiary: Chairman,
Vice Chairman, CEO, Branch: General Manager,
Deputy General Manager
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Compliance
Competence: expertise and management
experience
Good track record
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Further Opening-up Under the WTO
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Open 18 cities for foreign banks to conduct renminbi business
Allow eligible foreign banks to provide RMB services for
Chinese enterprises
Increase the single foreign equity holding in Chinese financial
institutions to 20 per cent from 15 per cent,
and set the maximum foreign equity holding at 24.99 per cent
Lower the operating capital requirement on foreign banks
Provide time limits for review and approval
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further Opening-up Under the WTO
• Issue regulation on credit card business to facilitate
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foreign involvement
Open the Chinese auto financing market and approve
the preparation of three foreign auto financing
companies
Allow the foreign banks to provide over 100 types of
business in 12 lines, including, QFII custodian, online banking, T-bond underwriting, cash management
and pooling, financial derivatives, wealth
management
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Measures to improve supervision of
foreign banks
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Establish risk rating for foreign bank supervision
Foreign banks branches subject to SOSA ranking
(Strength-of-Support Assessment) & ROCA rating
(Risk management, Operational control, Compliance,
Asset quality)
Foreign bank subsidiaries and Sino-foreign jointventure banks subject to CAMELs
Supervise Foreign banks by consolidated base
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Thank you !
Always welcome your comments and suggestions
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