【Abstract】In addition to directly setting up institutions, using equity as a link to strengthen in-depth cooperation with Chinese-funded institutions is a pragmatic way for foreign-funded financial institutions to quickly integrate into China's financial market
Wen | Yan Qinwen
Editor| Yingxin Zhang
An announcement suspending credit card applications pushed Standard Chartered Bank (China) Limited ("Standard Chartered China") into the spotlight.
On February 14, Standard Chartered China announced on its official website that due to the strategic adjustment of its credit card business, Standard Chartered China has closed the online credit card application channel in early January 2022 and intends to suspend the acceptance of credit card applications from all channels from February 20, 2022.
"Is Standard Chartered Bank going to exit the credit card business in the Chinese market?" The above announcement was just released, which triggered a heated discussion in the industry.
The discussion continued to ferment, and the next day (February 15), Standard Chartered China issued another announcement in response, saying that it was optimizing and adjusting the credit card application channel, and the online application service for credit cards was temporarily closed. After the optimization of the credit card application channel is completed, the credit card application will be restarted.
At present, the first announcement issued by Standard Chartered China is no longer available on the official website. Although the bank has further explained the matter, in the view of many industry insiders, even if Standard Chartered China does announce its withdrawal from the Chinese credit card business market, it will not be surprised. With the intensification of competition in the retail market, the future development of the corresponding business of foreign banks in the Chinese market is not clear, and foreign banks have previously contracted or adjusted their retail business.
Referring to the future development opportunities of foreign banks in China, a senior banker pointed out that foreign financial institutions should deeply participate in the reform and opening up of China's financial industry to promote their own development. In addition to the direct establishment of institutions, using equity as a link to strengthen in-depth cooperation with Chinese-funded institutions is a pragmatic approach for foreign-funded financial institutions to quickly integrate into China's financial market.
Why suspend the issuance of new cards
In the latest announcement, Standard Chartered China said that during the optimization of the bank's credit card application channel, the daily use of existing credit card customers and the renewal of expired cards will not be affected in any way. At the same time, the bank will arrange follow-up with the relevant team for customers who still need credit card applications.
In this regard, some market participants bluntly said that Standard Chartered China only suspended the issuance of new cards, not exited the credit card business.
In the view of Dong Ximiao, chief researcher of CmL FINANCE, Standard Chartered China's suspension of credit card applications is due to compliance and policy factors. "To handle credit card business, you need to inquire about the user's credit information, and the suspension may be one of the measures for rectification."
Caijing reporter noted that on February 9, Standard Chartered China was fined 2.3 million yuan by the Shanghai branch of Chinese Min min bank for violating the relevant management regulations on credit information inquiries and ordered to make corrections within a time limit, and Chen Yanlai, then credit director of Standard Chartered China's Retail Credit Department (Personal Finance and Credit Department) (China), was responsible for the violation and was fined 100,000 yuan.
On the other hand, in December 2021, the China Banking and Insurance Regulatory Commission (CBIRC) issued the Notice on Further Promoting the Healthy Development of Credit Card Business Standardization (Draft for Comment), proposing to "explore innovative models such as online credit card business through pilots and other means".
Dong Ximiao told caijing that the official documents have not yet been officially released, and how to supervise the online credit card business model is not clear. Standard Chartered China suspends credit card applications through online channels, or considers that official documents may make such requests.
However, some industry insiders believe that the current competition in the credit card market is fierce, which may be the main reason why Standard Chartered China suspended credit card applications.
Dong Zheng, a senior credit card research expert, told Caijing that Standard Chartered China's credit card localization is not enough, "First of all, it is not grounded." Now when credit cards are mentioned, volkswagen's first reaction will not be foreign banks. Compared with some domestic banks that have done well, their promotion and activities are too few, and the distance from the public is too far. ”
On the other hand, Dong Zheng pointed out that the market positioning of foreign banks, including Standard Chartered China, is relatively high-end and the risk control is also more stringent, "They are positioned in the 'people on the spire', it is difficult to reach the public, and the audience is getting narrower and narrower." ”
Taking Standard Chartered China as an example, the Caijing reporter randomly asked a number of credit card users, most of whom said that they had not applied for the bank's credit card, and even some users said that they did not know that Standard Chartered China had credit card-related business.
According to Standard Chartered China's official website, the bank's current credit card products include "Standard Chartered Zhencheng Series Credit Cards" and "Standard Chartered Zhenyi Series Credit Cards". Both sets of cards were released in June of the same year after the former China Banking Regulatory Commission officially approved the bank to start a credit card issuance business in 2014. The former is positioned as a high-end business traveler who attaches importance to the taste of life, while the latter is aimed at urban upstarts who attach importance to the shopping experience.
In fact, Standard Chartered China's credit card business was adjusted before the "suspension of credit card applications" sparked market discussions.
On June 15, 2021, the Bank issued the Notice on the Adjustment of Credit Card Points Policy, which proposes to reduce the total number of credit card points that can be counted and valid every year from 3.6 million points to 2 million points for each credit card account, adjust the domestic offline line from 3 points per 1 yuan spent to 1 point, and for US dollar credit cards, from 10 points per 1 DOLLAR spent to 7 points.
On February 9 this year, Standard Chartered China issued the Notice on Cancellation of Inactive Credit Card Accounts, and the bank said that in response to the spirit of supervision, it intends to fully liquidate credit card accounts that have not been activated in the bank for more than 12 months (inclusive) in the near future.
Foreign banks' retail business "slimming"
In fact, in recent years, in the fierce competition in the domestic credit card and even retail market, foreign banks have indeed appeared to have more than enough hearts and insufficient strength.
In 2008, bea became the first foreign bank to issue credit cards in China. Subsequently, foreign banks in China accelerated the layout of the credit card market, including Citibank, Standard Chartered China and other foreign banks followed suit.
Some practitioners told the "Finance" reporter that with rich experience and brand advantages, early foreign banks do have certain competitiveness. Many foreign banks hope to enter China's banking retail business market by issuing credit cards.
"In the past, the credit card business of domestic banks was not so aggressive and there were few services, and the credit cards, wealth management, and private banks of foreign banks had certain advantages." The above-mentioned person said bluntly.
However, a number of industry insiders also pointed out that from the actual development of foreign banks in China, it seems that there is insufficient staying power. "The central bank has previously released a data that the overall card issuance scale of foreign banks was about 600,000 a few years ago, and now a small bank may be able to exceed this number." Dong Zheng mentioned that the overall scale of the credit card business of foreign banks is not ideal.
A senior researcher in the banking industry also pointed out that "foreign banks have been positioned in a niche and have few outlets, and the main role of credit cards as an entrance-type product is to introduce the traffic of retail customers, if this business is not done well, it is difficult to open the retail market." ”
It is worth noting that the retail business of some foreign banks has frequently exposed the news of "contraction" in recent years.
In 2013, RBS and Deutsche Bank closed their retail operations in China, and at the end of 2016, ANZ announced the sale of retail and private banking in China (including Hong Kong and Taiwan) and Singapore and Indonesia to DBS Bank.
In 2021, citibank's retail business "slimming" has also attracted market attention. In April of that year, the bank announced its exit from retail banking in 13 global markets, including China, and retained only institutional client business, including private banking, cash management and investment banks.
At the time, Citigroup CHIEF Executive Jane Fraser said in a statement that while the 13 markets exited had excellent business, Citi didn't have the scale we need to compete.
A senior banking researcher believes that the competitive atmosphere of retail business was not strong before, but in recent years, domestic banks have carried out retail transformation to seize the high-end market, causing a certain degree of squeeze on foreign banks.
On the other hand, the industry as a whole is also facing challenges. "The essence of the banking industry is to develop with macroeconomic growth, the current domestic economic growth rate is not as good as before, the overall scale is bound to be affected." There are more than 4,000 domestic banks, which is definitely far beyond demand. Some practitioners said.
"Not only is the credit card business and retail business of foreign banks difficult to do, but also the local banks are also severely challenged by the emerging formats." Xu Qiyuan, a researcher at the Institute of World Economics and Politics of the Chinese Academy of Social Sciences and director of the Economic Development Research Office, pointed out in an interview with Caijing.
Where do we go from here?
In the view of many industry insiders, the competition in the domestic banking industry is intensifying, and for foreign banks, the future development space may be relatively limited.
In recent years, the opening up of finance to the outside world has continued to advance, which has provided a more relaxed and independent institutional environment for foreign banks to expand their business in China.
In August 2018, the China Banking and Insurance Regulatory Commission (CBIRC) issued the Decision of the China Banking and Insurance Regulatory Commission on The Repeal and Amendment of Certain Regulations, abolishing the restrictions on the proportion of foreign ownership in Chinese banks and financial asset management companies, and implementing the same rules for the proportion of equity investment between domestic and foreign investors.
On October 15, 2019, the Decision of the State Council on Amending the Regulations of the People's Republic of China on the Administration of Foreign-Funded Insurance Companies and the Regulations of the People's Republic of China on the Administration of Foreign-Funded Banks was officially promulgated. These include lowering the threshold for branches of foreign banks to absorb a single RMB time retail deposit to RMB500,000, and allowing foreign banks to have both sub-banks and branches in China.
Under the gradual relaxation of the restriction policy, foreign banks have developed steadily. According to data from the China Banking and Insurance Regulatory Commission, since 2018, the Banking and Insurance Regulatory Commission has approved more than 100 foreign investors to set up various banking and insurance institutions in China. As of the first half of 2021, foreign banks have set up 41 foreign-funded corporate banks, 115 branches of foreign banks and 139 representative offices in China, with a total of 930 operating institutions and total assets of foreign banks of 3.73 trillion yuan.
"Although the number of foreign-funded banking institutions and the scale of assets have increased significantly, in terms of relative scale, the development of foreign banks is still unsatisfactory." Some bankers have said bluntly. According to the "Quarterly Report on statistics of Chinese Minmin Bank", the assets of foreign banks accounted for 2.4% at the end of 2007, and at the end of 2019, they fell to 1.6%.
"Foreign banks have relatively small business in China, but this is not small and beautiful, but the smaller it is, the less it is incapable." Xu Qiyuan once wrote in Caijing that the dilemma faced by foreign banks has reasons for dissatisfaction with the soil and water, and to a certain extent, there is also a background of unfair treatment.
Specifically, on the one hand, on the liability side, there are restrictions on the source of deposits of foreign banks in China, and for a long time, the amount of time deposits absorbed by branches of foreign banks from Chinese residents has a lower limit of 1 million yuan. At the same time, unlike the parent bank, which relies on the main source of funds for interbank lending, foreign banks in China are facing problems such as higher interbank lending market costs.
On the asset side, due to strict compliance and internal constraints, foreign banks missed the rapid expansion period of China's financial market, compared with the rapid expansion of assets of domestic banks in the same period.
In addition, foreign banks in China are also facing difficulties such as the immature market of Chinese treasury bonds and foreign exchange derivatives, the difficulty of obtaining the qualifications of the main underwriter of bonds, and the incomplete free convertibility of capital and financial accounts, which restrict the development of intermediate business of foreign banks.
For foreign banks, where are the future opportunities? Some insiders pointed out that the asset management industry may become a battlefield for competition between China and foreign investors.
When announcing the "slimming down" last year, Citigroup CHIEF Executive Jane Fraser said that instead of continuing to invest resources in slow development, it is better to invest capital in wealth management and institutional business in Asia, believing that higher returns can be obtained.
Dong Ximiao told Caijing that foreign-funded financial institutions should fully understand and grasp The confidence and determination of China to expand and deepen the opening up of the financial industry, take the initiative to plan, accelerate the layout, actively cooperate, and promote their own development in the process of deep participation in the reform and opening up of China's financial industry. In addition to the direct establishment of institutions, using equity as a link to strengthen in-depth cooperation with Chinese-funded institutions is a pragmatic approach for foreign financial institutions to quickly integrate into China's financial market.
"We should give full play to the comparative advantages of foreign banks, promote the further improvement of China's financial market structure, make it better serve the real economy, and make the above process sustainable through the benign development of foreign banks' business." In this process, financial reform and financial opening up must be promoted in tandem. Xu Qiyuan pointed out.
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