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Economy

First private bank in Shanghai opens Free Trade Zone

Region:
Asia
Category:
Economy
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Each private bank capital must constitute at least two private firms. The bank to be established in the FTZ will be jointly formed by local private conglomerate Fosun and Juneyao

China's banking regulator approved five private banks in Tianjin, Shanghai, Zhejiang and Guangdong to bring more private participants in the state-dominated sector.

Each private bank capital must constitute at least two private firms. The bank to be established in the FTZ will be jointly formed by local private conglomerate Fosun and Juneyao.

Sources close to the authorities told that there are points about the financial contribution of each firm to the five banks. Some of the firms have sustained liquidity and foreign regulators want drivers to be exclusively Chinese interests.

Regulatory details for banks in the FTZ also were revealed on Wednesday. It is not easy for banks to add new branches or improve and make executive appointments in the area with some changes to be reported to regulators retrospectively.

The branches in the area could also avoid the 75 percent rate credit-deposit applies to all banks in China.

While the rate sets a limit on the amount that banks can lend, branches could coordinate their loans with loan balances to total remained within 75 percent of total deposits.

"Our concern is that this standard (credit-deposit rate) also apply in future FTA," said ANZ Banking Group economist.

Authorities have said before that an accounting system of free trade will be implemented during the first half of this year, probably bringing major changes to the restrictions on capital flows across borders under the capital account and will be a key feature of banks in the area according to ANZ.

Banks are encouraged to give more autonomy to its branches in Shanghai area, but should exercise prudent oversight of liquidity risk, compliance and border.

" The overall tone of the statement today reflects that the authority adheres to Shanghai negative list approach and adopt a spirit of ' use and archive' to regulate banking . Believe that adoption of this approach is an important step in support financial innovation in China, " said economists at ANZ .

To date, 11 Chinese and 20 foreign banks have been recorded in the FTZ and have been active in a range of cross-border renminbi transactions that authorities have allowed since early this year, helping multinational firms to improve efficiency and costs in the distribution of funds and less expensive access outside funding costs.

During the first four months of this year , firms in the area have secured 4,500 billion yuan in loans out costs. A total of 12 companies participated in the pilot pool border renminbi -denominated funds displacing 4,600 million yuan . The border base rose 90 percent from a year earlier to 42.600 million yuan.

traslation: Belén Zapata