Foreign banks’ extra leeway in China will benefit consumers, says HSBC’s regional boss

Further market liberalisation will lead to better products and services for customers by increasing competition, says HSBC Asia Pacific CEO

PUBLISHED : Monday, 05 March, 2018, 9:34am
UPDATED : Monday, 05 March, 2018, 9:34am

New measures making it easier for foreign banks to operate in China will increase competition and ultimately benefit consumers, according to the regional chief executive of HSBC Holdings.

“The opening up is a good thing,” Peter Wong Tung-shun, deputy chairman and chief executive of HSBC Asia Pacific, told the South China Morning Post.

However, he said HSBC has no plans to make new investments in any of its domestic rivals despite Beijing’s new measures to further open up the market to overseas players.

The extra leeway provided by regulators will lead to better products and services being available to customers by increasing competition in the world’s second largest economy, said Wong, also HSBC’s managing director, on the sidelines of an annual gathering of the nation’s top political advisers in Beijing on Sunday.

The bank, the largest lender in Hong Kong, already works closely with Bank of Communications (BoCom) as a partner, and it has no further plans to buy stakes in any other domestic banks, he said.

HSBC holds an 18.7 per cent stake in Shanghai-based BoCom, the mainland’s fifth largest bank. BoCom is dual-listed in Hong Kong and Shanghai, and was the first of the China’s five biggest banks to go public.

HSBC was one of the first four overseas lenders to set up a mainland subsidiary. The other three are Standard Chartered, Citibank and Bank of East Asia.

HSBC’s pre-tax profit rose 11 per cent on the year to US$21 billion in 2017, the bank said in February.

China recently cut the amount of red tape for foreign banks to conduct business there, as Beijing delivers on its vow to create a more level playing field.

The China Banking Regulatory Commission (CBRC), the mainland’s top banking regulator, posted new rules in late February freeing foreign banks from the obligation to obtain 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.

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The rule changes also made clear for the first time the regulations governing 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.

Banks need to obtain just one approval, instead of two previously, if they want to add branches, the same requirement as for Chinese banks. The new measures also make it easier for foreign banks to go through regulatory formalities to appoint executives.