The Chinese bank regulator, China Banking Regulatory Commission (“CBRC”) issued a Circular on Carrying on Certain Businesses by Foreign Invested Banks (关于外资银行开展部分业务有关事项的通知) (Yin Jian Ban Fa [2017] No.12, the "Circular") earlier this month. The Circular indicates significant opportunities for foreign invested banks with presence in China (capturing onshore bank subsidiaries, bank joint venture entities, and onshore branches).

The Circular supports the continued global expansion by Chinese enterprises, and the opening up of the onshore financial market to foreign institutions. Amongst other significant relaxations, the highlights are:

  1. Underwriting of Chinese Government Bonds. The Circular confirms that a foreign invested bank is not required to obtain any prior CBRC approval for underwriting onshore government bonds, and is only required to submit a post-business report to CBRC. The next Ministry of Finance’s bidding process for eligible bond underwriters is scheduled to take place at the end of this year. We expect more foreign invested banks will now seek to participate in Chinese bond underwritings.
  2. Foreign Invested Banks can invest directly in other Chinese Financial Institutions. The Circular signals, for the first time, a green light for direct investment by a foreign invested bank in onshore bank financial institutions, such as setting up “direct-selling” banks, asset management companies, credit card centres and other onshore financial institutions (including equity investment). We anticipate further detailed implementation rules will be announced but the aim is to provide more alternatives as to how foreign invested banks participate in onshore financial institutions.
  3. Cross-border cooperation within a foreign bank group to raise offshore capital for Chinese clients. Foreign invested banks are now expressly permitted to proactively cooperate with their offshore parent groups to assist Chinese clients in their overseas capital raising, initial public offerings, mergers and acquisitions and other financing activities. The Circular removes previous uncertainty about the scope of foreign invested banks’ role in offshore fund raising for Chinese clients. We expect this relaxation will enable foreign invested banks to cooperate more closely with their offshore parent group to engage in client referrals, liaison and other ancillary onshore activities in connection with offshore capital market transactions.