What is the development and the key highlights?
Banking, being a part of financial service industry, has now been fully opened to foreign investment. There is no foreign shareholding restriction on the banking sector. However, wholly foreign-owned banks, joint venture banks (the WFOE/JV Bank) and branches of foreign banks (collectively the FIE Bank(s)) are still subject to separate regulations. Only the banks with foreign shareholdings acquired through acquisition or share participation are regulated in the same way as domestic banks.
The table below lists the main requirements for FIE Banks, which may not apply to domestic banks. You will notice some inconsistency between the different regulations. The application of certain requirements can vary depending on the circumstances. Please contact us should be there anything you wish to discuss.
|Negative Lists1||FIE Banks Licensing Measures (2018 Edition)2||FIE Banks Regulations (2018 Draft Amendments)3|
|Is there any foreign shareholding restriction?||No||No||No|
|Who can be a foreign shareholder of a FIE Bank?||N/A||
Financial institution, but the only or controlling foreign shareholder must be a commercial bank whose:
|Same as required under the FIE Banks Licensing Measures, but no reference to the reduced threshold for HK and Macau bank shareholders|
|Is a foreign bank allowed to set up a branch and a subsidiary bank at the same time?||N/A||N/A||Yes, but branches can only conduct wholesale business (for both RMB and foreign currency)|
|What is the minimum capital requirement for a FIE Bank?||N/A||
For a WFOE/JV Bank: N/A
For a branch: RMB200 million or forex equivalent allocated unconditionally from parent bank.
For a WFOE/JV Bank: RMB1 billion or forex equivalent
For a branch:
|Does a FIE Bank need to wait a year before applying for RMB licence?||N/A||Yes||No, RMB licence and business opening approval can be applied at the same time.|
|Guo Fa  No. 574||Shanghai FTZ Financial Service Industry Guidance (2017 Edition)5||Shanghai FEI Banks Service Guideline (2019 Edition)6|
|Is there any foreign shareholding restriction?||No||No||No|
|Who can be a foreign shareholder of a FIE Bank?||N/A||The only or controlling foreign shareholder of a WFOE/JV Bank and branch's parent bank must meet certain assets thresholds.||Same as required under the FIE Banks Licensing Measures|
|Is a foreign bank allowed to set up a branch and a subsidiary bank at the same time?||N/A||N/A||N/A|
|What is the minimum capital requirement for a FIE Bank?||N/A||For a WFOE/JV Bank: N/A For a branch, operational fund allocated from parent bank must meet corresponding requirement.||Same as required under the FIE Banks Licensing Measures|
|Does a FIE Bank need to wait a year before applying for RMB licence?||1-year waiting period requirement has been "temporarily suspended" from May 5, 2018 for FIE Banks located in a Free Trade Zone.||N/A||Yes|
What does this mean for your business?
- A foreign bank is now permitted to set up its controlled joint venture bank in China, if it has not set up a wholly-owned subsidiary bank;
- A foreign bank is now permitted to hold a branch and a WFOE/JV Bank at the same time;
- A foreign bank is now permitted to open a branch to conduct both forex and RMB business at the same time if and when the branch is opened in a Free Trade Zone;
- The minimum capital requirement for setting up a WFOE/JV Bank tends to be reduced though in practice a higher capital injection is always welcomed;
- The business allowed to be conducted by a WFOE/JV Banks is extended and essentially the same as domestic banks' business, but business allowed to be conducted by a foreign bank's branch is still subject to certain restrictions;
- Certain business which previously required prior approval from CBIRC are now only subject to filing requirements;
- Certain thresholds for operation funds and assets tests are potentially lower.
- Negative Lists includes (i) the Special Administrative Measures for Foreign Investment Access, (ii) the Special Administrative Measures for Foreign Investment Access to Pilot Free Trade Zones and (iii) the Special Administrative Measures for Foreign Investment Access to China (Shanghai) Pilot Free Trade Zone.
- Implementation Measures for the Administrative Licensing Items concerning Foreign-Funded Banks (2018 Revision) issued by CBIRC in February 2018
- Regulation on the Administration of Foreign-Funded Banks and its Detailed Rules for Implementation (Draft amendments published in November 2018)
- Decisions on Temporarily Adjustment of Relevant Administrative Rules, State Council's Circulars and Industrial Regulations Approved by the State Council in the Pilot Free Trade Zones made by the State Council on December 25, 2017
- Guidance on the Negative List for the Opening-up of the Financial Service Industry in China (Shanghai) Pilot Free Trade Zone (2017 Edition)
- Service Guideline on the Examination and Approval of the Establishment, Change and Termination of the Subsidiaries and Branches of Foreign-Funded Banks issued by Shanghai CBIRC in July 2019
About Norton Rose Fulbright Canada LLP
Norton Rose Fulbright is a global law firm. We provide the world's preeminent corporations and financial institutions with a full business law service. We have 3800 lawyers and other legal staff based in more than 50 cities across Europe, the United States, Canada, Latin America, Asia, Australia, Africa, the Middle East and Central Asia.
Recognized for our industry focus, we are strong across all the key industry sectors: financial institutions; energy; infrastructure, mining and commodities; transport; technology and innovation; and life sciences and healthcare.
Wherever we are, we operate in accordance with our global business principles of quality, unity and integrity. We aim to provide the highest possible standard of legal service in each of our offices and to maintain that level of quality at every point of contact.
For more information about Norton Rose Fulbright, see nortonrosefulbright.com/legal-notices.
Law around the world
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.