China cuts red tape as it looks to even the field for foreign banks

China has simplified procedures for foreign banks to conduct business and cleared the rules on their eligibility to invest in their mainland rivals, as Beijing delivers on its vow to create a level playing field.

Foreign banks do not require administrative pre-approval to conduct offshore wealth management services for clients and act as custodians for mutual funds investing in stock markets as long as they notify the regulator, the China Banking Regulatory Commission (CBRC) said on Saturday on its website.

They also need to obtain one approval instead of two previously to add branches, the same as Chinese banks. The new measures also made it easier for foreign banks to go through regulatory formalities to appoint executives.

“The easing of administrative procedures makes it quite practical and effective for foreign banks to expand business operations in the mainland,” said Xu Wenbing, chief banking analyst at Bank of Communications, in Shanghai.

The new rules also made clear for the first time the eligibility of foreign banks’ mainland subsidiaries to invest in Chinese lenders. The criteria include profitability for three straight years, no major irregularities for two years, implementation of certain risk controls and technology capability.

The CBRC said that with the new rules in place, the banks have “clear legal basis” on eligibility and formalities required to conduct such investments after it first pledged to lift restrictions in March 2017.