No pre-establishments

The previous regulations require that the unique or controlling shareholder of a foreign-funded bank must establish a representative office in China for at least two years. This requirement has been removed by the amendment.

The CBRC press release states that after this requirement is abolished, foreign banks or financial institutions can freely choose whether to set up representative offices in China before they decide to establish branches.

Since 2007, some branches and representative offices of foreign banks have been changed into foreign-funded banks in China, and the number of outlets of foreign banks in China, such as HSBC and Citibank, has grown continually. However, more foreign banks still wish to enter China.

In 2014, the CBRC approved the establishment of representative offices for the Bank of the Argentine Nation and Nigeria's Access Bank in Shanghai and Beijing respectively.

According to the CBRC, by the end of 2013, banks from 51 countries and regions had established 42 foreign-funded banks, 92 foreign bank branches and 187 representative offices in China.

The above-mentioned anonymous Shenzhen branch manager of a foreign bank said that after the requirement is scrapped, foreign banks will be able to set up outlets in China much quicker, which may attract more foreign banks to operate business in China. This will be beneficial for boosting the innovation and development of China's banking sector.

Yuan business opened

The revised regulations also loosen requirements on foreign banks to conduct yuan business. Foreign banks will be able to apply for yuan business if they have operated in China for at least one year, instead of the mandatory three years stipulated in the previous regulations. The banks applying for such business will be subject to no profitability requirement, a change from being profitable for two successive years. If a foreign bank has one branch already allowed to operate yuan business, its other branches will no longer face restrictions on the time of operation in China when applying for the same business.

The CBRC press release says foreign bank institutions can apply for operating yuan business more conveniently in a short time, so that they can better service Chinese and foreign companies in China.

Foreign banks or joint venture banks that have newly entered China will benefit from this change. SPD Silicon Valley Bank, a joint venture between Shanghai Pudong Development Bank and U.S. Silicon Valley Bank, is devoted to providing unique financial products and services to the technology and innovation industry.

When interviewed by Securities Times in 2013, Ken Wilcox, the then president of SPD Silicon Valley Bank, said that as it was unqualified for operating yuan business, this joint venture bank could hardly make full use of the experience and competitiveness brought by Silicon Valley Bank when serving China's technology and innovation companies.

Opening for business in August 2012, SPD Silicon Valley Bank was only allowed to operate onshore dollar business at that time because it was established for less than three years. Local Chinese companies, however, naturally had a much greater need for yuan loans than U.S. dollars.

"Development of foreign-funded banks in China has slowed down in recent years. This is somewhat because of the strict restrictions on them," said Guo. "Relaxed regulation will help create a better business environment .

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