Talks 'can help Chinese banks' in UK

Roger Gifford, Lord Mayor of the City of London

Regulators urged to pave the way for opening up additional branches

Regulators in Britain and China can help more Chinese banks open branches in the United Kingdom, City of London Lord Mayor Roger Gifford said.

"We would like the regulators to be comfortable with each other so that we can have branches here as well as subsidiaries, because we would like to see more banks opening here," Gifford told China Daily.

Since the 2008 financial crisis, the Financial Services Authority, Britain's financial services regulator, has made it more difficult for some foreign banks to set up branches in the country.

Branches are offshore arms of foreign banks that the authority has less control over. Subsidiaries, in contrast, are subject to the capital requirements that apply to Britain's local banks.

Bank of China is the only Chinese bank to have a branch.

Discussions became heated a year ago when the Financial Times reported that China's largest State-owned banks are moving chunks of their European business to Luxembourg to escape tougher regulations in the City of London.

It was brought up again during the second Hong Kong-London Forum in December, when regulators from Beijing, Hong Kong and London met to discuss further cooperation between China and the UK in financial services.

During a news conference after the forum, Wang Jianxi, then executive vice-president and chief risk officer at China Investment Corp, criticized the British regulator's restrictions on Chinese banks.

"The new regulations have made it very costly for Chinese banks in London," Wang said. And if London has restrictions on foreign banks' subsidiaries, "I really doubt that Chinese banks will still see a need to have operations here", he said.

The British government previously said that the restrictions are not aimed at the Chinese. However, Gifford said more initiative can be taken by Britain.

He said that if the only barrier preventing the Financial Services Authority from permitting Chinese banks to open branches is the risk of bankruptcy, then the authority is able to speak to the China Banking Regulatory Commission, China's top banking regulator, about how to guard against such risk.

Gifford also said that the Financial Services Authority has not completely refused to let Chinese banks open branches, saying that he believes the authority has an open attitude.

However, Gifford said that while he supports and encourages increased dialogue on this point, the City of London does not have the power to bring about changes.

He said his team talks about this subject often with the UK Treasury.

"And what was said, was that, if it is a matter of the regulators understanding the individual banks better, then please let's increase the level of dialogue between the regulators," Gifford said.

He said all European banks can open branches in the UK, because there is agreement and understanding between UK regulators and these countries.

Gifford said there are many other countries whose banks are not allowed to open branches in the UK.

"For instance, many African and emerging market banks cannot open branches in London, because there isn't an agreement with their regulators," he said.