China has given licenses to BNP Paribas and Deutsche Bank that allow them to be lead underwriters of corporate debt from non-financial issuers.
The “type A” licences will allow the banks to expand their businesses from underwriting Panda bonds to working on notes, private placement notes, asset-backed securities and other issues by Chinese and foreign non-financial institutions in the domestic market.
The approvals come only a few days after the National Association of Financial Market Institutional Investors, one of the main regulators of the interbank market, published its latest criteria for foreign banks seeking type A licences.
NAFMII said the applicants must have been designated systemically important global institutions, to have underwritten at least US$20bn of bonds globally on average in the past three years, and to have had licences to act as underwriters for Chinese corporate bonds for at least one year, among other conditions.
“The regulators aim to give more consideration to the performance of the parent banks in evaluating type A licence applications at a time when foreign bank branches in China may not be able to compare to Chinese banks,” said a NAFMII official.
The approvals for BNP Paribas and Deutsche Bank have come earlier than expected because the central government wants to see more concrete progress on opening up the financial market, the official said. But further approvals are not likely to be given for a while to prevent risks and because some additional regulations need to be finalised, said the official.
Six foreign banks have submitted applications for type A licences. Of these, HSBC, Standard Chartered Bank and BNP Paribas already have type B licences, which allow them to act as lead underwriters of Panda bonds. Deutsche Bank was only allowed to act as an underwriter of Panda bonds, along with JP Morgan and Citigroup.