Foreign Banks Take RMB Deposits

♠ Posted by Emmanuel in , at 4/23/2007 01:25:00 AM

After waiting for some time to offer yuan accounts in the presumably lucrative China market, overseas firms will get their chance today. Although it has been reluctant to open up its banking sector to foreign competition, China needed to meet WTO stipulations on financial services at the end of 2006. Note though that these foreign banks will mainly target affluent clients. As I pointed out before, this may have something to do with onerous restrictions designed to safeguard the interests of local banks, most of which are state-owned:

To become eligible for the operations being launched Monday, each foreign bank has undertaken a vast restructuring that was mandated by local regulators, including the establishment of a legally incorporated holding company in China. The lengthy process had left uncertain when the long promised access would actually be permitted.

According to details the banks published in legal notices over the weekend, they have received approvals necessary to open in selected cities. The banks each intend to target relatively well-to-do Chinese citizens. Bank of East Asia is casting the widest net of the four, offering potential customers fee-free banking if they maintain deposits above 5,000 yuan, about $650. It will charge them 10 yuan a month if the balance falls short.

Considerably higher thresholds will apply at Citigroup, HSBC and Standard Chartered, likely ensuring only China's richest shift accounts to the global leaders. These banks intend to levy monthly management fees of 50 yuan to 150 yuan on deposit balances under 80,000 yuan and 100,000 yuan, depending on the bank.

China Daily further notes:

The four banks [Citigroup, HSBC, Standard Chartered, & Hong Kong-based Bank of East Asia], however, have fewer branches than their established domestic rivals. As such, they plan to highlight their wealth management services and target high-end customers by requiring high minimums.

Standard Chartered said it would roll out various renminbi products for customers under two retail brands - Priority Banking and Excel Banking.

HSBC will concentrate on its Premier Wealth Management service for its retail banking business and charge 300 yuan a month to handle accounts with less than 500,000 yuan.

Last week, Citigroup became the first foreign bank in China to offer a yuan-denominated investment linked insurance product.