Foreign banks have been invited to apply to conduct yuan business in Shenzhen city under the latest guidelines issued by the People's Bank of China's (PBOC) Shenzhen branch. Shenzhen is the second mainland city after Shanghai to allow foreign banks to do restricted yuan business. A Hongkong Bank spokesman said the bank hoped to be among the first batch to be licensed to carry out yuan transactions in the city. The bank was among the first nine foreign banks authorised to carry out local currency transactions in Pudong in March last year. Guidelines issued by Xinhua yesterday require foreign banks seeking to conduct yuan business in Shenzhen to have three years of mainland operations, to have made a profit in the past two years, and have average outstanding loans of US$150 million a month. Xinhua said foreign banks would be able to take yuan deposits, make loans in yuan, provide yuan guarantees and invest in state bonds. It is understood the latest guidelines will be followed by more detailed regulations governing yuan business. Under PBOC regulations, foreign banks can accept deposits from overseas enterprises and registered individuals, but not from mainland companies and individuals. Foreign banks must also keep the value of their yuan liabilities to below 35 per cent of their foreign currency liabilities. Joint-venture banks would be considered for yuan business with average monthly outstanding loans of $100 million. Finance companies, but not banks, would be restricted to deposits of at least one million yuan and for not less than six months.