Bank of East Asia, the city's fifth-largest lender, plans to issue yuan-denominated bonds either in Hong Kong or on the mainland to meet growing funding needs, said an official of its mainland subsidiary. 'We have a plan to sell bonds,' said Kwan Tat-cheong, a vice-president at Bank of East Asia (China). Mr Kwan declined to give further details. The comments came after the central bank last week pledged to allow Hong Kong banks incorporated on the mainland to issue yuan bonds in the city. '[The People's Bank of China and the Hong Kong Monetary Authority] are working very closely and conducting research on measures to resist the recent financial crisis,' said Luo Rui, the deputy director-general of the PBOC's General Office, on Friday. 'Several foreign banks have already [requested] to issue yuan bonds in Hong Kong.' Five mainland banks, including Bank of China, China Construction Bank Corp and Bank of Communications, have sold a combined 22 billion yuan (HK$24.77 billion) in bonds since last year. Foreign banks are barred from issuing yuan-denominated bonds because of capital controls. But given the deepening global credit crisis, analysts said foreign banks in the country were finding it more difficult than their local counterparts to obtain funds from the interbank market, prompting the mainland government to allow them to issue yuan bonds as an alternative funding channel. 'This will impact most on foreign banks whose deposit base on the mainland is still rather limited,' said Ivan Li Sing-yeung, an analyst at Kim Eng Securities. 'They may further restrict lending to local customers, whose main focus is the small and medium-sized enterprises in the Pearl River and Yangtze River delta regions.' Market watchers expect HSBC Holdings, Standard Chartered Bank, Hang Seng Bank and BEA, which were among the first batch of foreign banks to obtain approval to set up a subsidiary bank on the mainland last year, to be yuan bond pioneers in Hong Kong.