A leading regional lender in the coastal province of Jiangsu has become the first municipal bank to obtain approval to engage in custodial operations for Qualified Foreign Institutional Investors (QFII’s).
Bank of Jiangsu said to domestic media on 13 August that Chinese regulators had approved its qualifications to provide custodial services to QFII’s, making it the only municipal commercial bank to enjoy this status, as well as the first to obtain approval since the launch of new QFII regulations.
“China’s determination and confidence to further open the financial services sector has brought new opportunities for domestic and overseas financial institutions to engage in bilateral participation in capital markets,” said a Bank of Jiangsu official.
“Obtaining QFII custodial qualifications is a sign that the bank has launched a new journey in cross-border custodianship…Bank of Jiangsu will further integrate into domestic financial opening and reform and the integrated strategic development of the Yangtze Delta region, and provide comprehensive financial services for QFII’s to participate in domestic financial markets.
“This will assist the strong development of capital markets.”
QFII custodial services have long been dominated by the big six state-owned banks, with observers recently anticipating a move by regulators to bring more small and medium-sized banks into the fold in the wake of China’s financial opening drive.
QFII approvals have markedly increased since the start of 2021, amidst a push by Beijing to drive the opening of the Chinese capital markets. This has increased demand for QFII custodial services, and brought opportunities to smaller lenders approved to operate in this area.
2019 also saw the cancellation of key QFII investment quotas and restrictions, giving Chinese commercial banks greater leeway to engage in cross-border financial activities.