China's banking regulator promised foreign banks that incorporate locally temporary relaxation of a loan-to-deposit limit imposed on domestic rivals.
The intention was revealed during a meeting yesterday between the China Banking Regulatory Commission (CBRC) and 30 banks in Beijing, mostly foreign lenders, to discuss proposed revisions to regulations on foreign lenders' operations on the mainland, industry sources said.
Mainland lenders are subject to a 75 per cent regulatory cap on the loan-to-deposit ratio. On the other hand, foreign lenders have until now been barred from taking yuan retail deposits and extending local currency consumer loans.
Subjecting them to the same loan-to-deposit ratio cap after China's scheduled removal of the yuan retail banking ban on foreign banks in December - the fifth anniversary of its World Trade Organisation membership - would greatly limit the expansion of their yuan lending business, foreign banks said.
Xu Feng, director-general of the CBRC division overseeing foreign banks, said the regulator would be willing to grant a temporary relief from the rule.
The centerpiece of the proposed revision to the rules would require foreign lenders to incorporate their mainland operations as local legal entities before being allowed to take yuan retail deposits of less than one million yuan each.
