Another foreign bank is expected to usher in new progress in applying for fund custody qualifications.
Recently, according to the information on the official website of the China Securities Regulatory Commission, the progress of the "Approval of Commercial Banks for Fund Custodian Qualifications" of HSBC Bank (China) Co., Ltd. (hereinafter referred to as "HSBC China") has been accepted by the regulator.
Brokerage China reporters noted that in the context of financial opening up, in terms of fund custody qualifications, not only a foreign-funded institution updated its progress during the year. In June this year, France Paribas (China) Co., Ltd. (hereinafter referred to as "BNP Paribas China") was successfully approved for a fund custody license. At present, in addition to HSBC China, there are 11 domestic banks and securities firms queuing up to apply for fund custody qualifications.
Industry insiders believe that HSBC China's application for fund custody qualification is an important part of the foreign-funded institution's business in Chinese mainland, which can better serve domestic and foreign asset management institutions and promote the connection between China and overseas markets.
When an unsolicited application is in progress
According to the latest available data disclosed by the China Securities Regulatory Commission, as of August 2024, a total of 66 institutions have obtained fund custody qualifications, including 31 domestic banks, 3 foreign banks and 32 securities firms. Among them, domestic banks include 6 state-owned banks, 12 joint-stock banks, 2 rural commercial banks and 11 urban commercial banks; The three foreign banks include Standard Chartered Bank (China), Citibank (China) and Deutsche Bank (China), while 32 securities firms include Haitong Securities, China Merchants Securities and Guosen Securities.
Brokerage China reporters noted that in terms of foreign capital, in addition to the above three foreign-funded institutions, on June 12 this year, the China Securities Regulatory Commission approved the securities investment fund custody qualification of BNP Paribas China, thus making BNP Paribas China the fourth foreign bank in the mainland to be approved for securities investment fund custody qualifications.
According to the approval documents of the China Securities Regulatory Commission (CSRC), BNP Paribas China will complete the preparatory work for the securities investment fund custody business within 6 months from the date of approval; After obtaining the business license renewed by the administrative authority for industry and commerce, it shall renew the "License for Engaging in Securities and Futures Business" from the CSRC; Before obtaining the "License to Operate Securities and Futures Business", it is not allowed to carry out fund custody business externally.
Judging from the progress of the approval, BNP Paribas China officially submitted the application for the relevant qualifications in July 2022, and the CSRC approved it in June this year. In other words, it took nearly 2 years from the time I applied for this qualification to the time I was officially approved.
Before BNP Paribas China, the last company to be approved for fund custody qualification was Shanghai Rural Commercial Bank, which was approved for this qualification on October 20, 2023, and was accepted by the China Securities Regulatory Commission (CSRC) in July this year, officially launching fund custody business.
From the perspective of time, Western Securities submitted the application materials for fund custody qualification as early as January 2018, and it has been more than 6 years so far, but so far the progress is not as good as that of the latecomers with foreign investment background, and there is still no news on the acceptance of the situation.
Opening up to the outside world continues to deepen
"Custody is a business that many foreign banks have to do, and domestic fund custody is a very important part of it, and there will only be more and more institutions for foreign investors to participate in the domestic fund business, and of course they will take precautions." Earlier, a senior executive of a foreign bank in China told a Chinese reporter from a brokerage.
Looking back, in July 2020, the China Securities Regulatory Commission (CSRC) and the former China Banking and Insurance Regulatory Commission (CBIRC) jointly revised and promulgated the Administrative Measures for the Custody Business of Securities Investment Funds (the "Custody Measures"), which provides clear regulatory guidance and regulatory basis for foreign banks to enter the mainland fund custody market.
In the month of the issuance of the Custody Measures, foreign banks have actively applied for relevant business development qualifications. In 2020, Citibank (China) and Deutsche Bank (China) received regulatory approval for securities investment fund custody qualifications.
In fact, Standard Chartered Bank (China) submitted the qualification application in 2018 and was officially approved four months after submitting the information, becoming the first foreign bank fund custodian.
Firm layout in China
Recently, a number of senior executives of foreign-funded institutions expressed their feelings to the Chinese reporter of the brokerage firm that in the face of the complex and changeable external environment, China's capital market has always adhered to deepening reform and continued to promote the opening up of institutions, markets and products in multiple dimensions.
Lu Xuan, President of Citibank China, President and Director of Citibank (China), told Brokerage China reporters, "We are actively applying for securities and futures licenses, which will further improve our business in China." He stressed that the bank will continue to play a good role as a "bridge" between financial services in different markets.
Wang Yunfeng, President and Chief Executive Officer of HSBC Bank (China), also pointed out that in recent years, HSBC has invested billions of yuan in Chinese mainland, including increasing its shareholding in HSBC Life Insurance and HSBC Qianhai Securities, as well as setting up HSBC Fintech and HSBC Insurance Brokers.
In June this year, HSBC China completed the acquisition of Citi's personal wealth management business in Chinese mainland, reaffirming HSBC's long-term confidence in the Chinese market.
Since 2020, when China lifted restrictions on foreign ownership in securities, futures and other companies, foreign institutions have taken advantage of the policy to accelerate their deployment in the Chinese market. According to the Report on the Development of Foreign Banks in China 2023-2024 released by the China Banking Association, by the end of 2023, a total of banks from 52 countries and regions had set up branches in China, and the total number of foreign bank operating institutions had reached 888.
The number of custodian members of the fund continues to expand
It is worth mentioning that in order to improve the layout of large asset management business, domestic banks, securities firms and foreign-funded institutions are actively deploying fund custody qualifications.
According to the information disclosed on the official website of the China Securities Regulatory Commission, up to now, a total of 12 institutions, including HSBC China, are queuing up to apply for fund custody qualifications, including 7 securities firms such as Western Securities and Caixin Securities, and 5 banks including HSBC China and Mengshang Bank.
In the view of industry insiders, in the future competition of asset management business, the diversified capabilities of business, including license qualifications, as well as the company's internal coordination capabilities, may become a sharp weapon for institutions to compete on the same stage.
In the operation of the fund, the fund custodian has the responsibility of safely keeping all fund assets, executing the investment instructions of the fund manager, supervising the investment operation of the fund manager, and reviewing the net asset value of the fund calculated by the fund manager and the financial statements prepared, which means that the business stickiness between the institution with the qualification of the fund custodian and the fund company is stronger than that of the institution without the qualification of fund custodian.
"One more business license is one more leg to walk, the fund custody business itself is not profitable, but it can be derived from business opportunities such as pulling institutional account opening, FOF and other business opportunities, which is conducive to the diversification of institutional business," a senior person from the asset custody department of a brokerage told a reporter from Brokerage China.
Editor-in-charge: Yang Yucheng
Proofreading: Wang Jincheng