A foreign investor establishing a wholly-owned bank or a joint venture bank in China shall meet the following conditions in addition to a freely convertible currency with a minimum registered capital of 300 million yuan (its registered capital is paid-in capital):
1. The applicant is a financial institution;
2. The applicant has set up a representative office in China (a wholly foreign-owned bank shall set up a representative office for more than two years);
3. The total assets of the applicant at the end of the year before applying for the establishment of a foreign-funded bank shall not be less than $654.38 billion;
4. The financial supervision system in the country or region where the applicant is located is sound, and the applicant is effectively supervised by the relevant competent authorities in the country or region where it is located;
Five, the relevant competent authorities of the country or region where the applicant is located agree to his application for establishing a bank in China;
Six, the applicant meets other prudential conditions stipulated by the people's Bank of China.
An analysis of the feasible shareholding investment model of China banking industry
Ba Shusong.
Present situation and characteristics of investing in China's banking industry
Although foreign financial institutions can enter the banking market in China by setting up wholly foreign-owned banks and establishing new banks through joint ventures, they are gradually favored by foreign financial institutions by buying and holding shares in banking institutions in China.
In June 5438+February, 2003, the CBRC announced that the proportion of a single foreign-funded institution would be increased from the original 15% to 20%, accounting for no more than 25% of the total foreign investment, and the nature and business scope of the invested institution would remain unchanged.
In addition, there are many commercial banks and credit cooperatives with clear intentions, such as Jinan Commercial Bank and Commonwealth Bank of Australia, Bohai Bank and Standard Chartered Bank, German Bank for Reconstruction and Development Group and Nanchong Commercial Bank, Commonwealth Bank of Australia, Dutch Cooperative Bank and Hangzhou Rural Credit Cooperative. Shanghai Rural Credit Cooperative, China Everbright Bank, Suzhou Commercial Bank, Hangzhou Commercial Bank, Harbin Commercial Bank and the four major state-owned banks are also in full swing to discuss the introduction of strategic investors.
As far as reality is concerned, the advantages of participating in China's financial industry by investing in shares are:
Lower entry cost. Compared with sole proprietorship and joint venture, equity participation avoids numerous regulations and policy restrictions and various barriers. In addition, when foreign financial institutions invest in some small and medium-sized financial institutions, they can gain greater rights and interests with less capital cost.
It plays an important role in business development and management. It can combine the development and innovation of new products with the distribution network of Chinese banks and the scale of RMB business, penetrate the target and product fields more pertinently, and expand the business share in the local market.
In terms of time, we avoided the time limit and geographical limit of opening RMB business in China, fully entered the domestic banking market ahead of schedule, and used the branch network of domestic banks and extensive customer base to promote the products and services of foreign banks.
In the process of foreign investment in China Bank, with the development and deregulation of the financial market, the role of foreign investment is constantly evolving: from the beginning as a financial investor, it has gradually changed into a strategic investor; From initially seeking only the right to speak of the board of directors, it has developed into trying various cooperation at the business level.
From the current point of view, the way to invest in stocks presents the following characteristics:
The direction of foreign equity participation has diverged. Among the foreign financial institutions that have invested in China's financial market, the first team of foreign banks represented by Citigroup and HSBC has the real strength to participate in the first camp of Chinese banks in a large proportion; Other banks are not as good as the above-mentioned banks in scale, but such foreign banks with obvious business characteristics in China will mainly be joint-stock commercial banks; In addition, foreign investment in the third and fourth echelons is aimed at the goals they can win. The principle of "suitable for every household" is vividly reflected in the case of complementary equity participation.
Small and medium-sized banks, especially city commercial banks, are the next hot spot for foreign financial institutions to participate in shares. Small and medium-sized financial institutions, including joint-stock commercial banks, city commercial banks and rural credit cooperatives, are also favored by all foreign financial institutions. The reason is:
Realistic needs of small and medium-sized financial institutions. China is currently reforming and reorganizing 1 12 city commercial banks and more than 50,000 rural credit cooperatives, which is the most differentiated banking institution at present. In addition to a number of bad institutions that have to withdraw from the market, a considerable number of them urgently need to replenish capital, improve asset quality and management level, and introducing foreign capital is their first choice.
Policy support from regulatory authorities. With the positive effect of foreign participation in China's small and medium-sized financial institutions highlighted, the regulatory concept and level of the regulatory authorities have improved, and the government has supported foreign participation in small and medium-sized financial institutions, and many cases of "matchmaking" have emerged. On September 7, 2004, China Banking Regulatory Commission (CBRC) indicated that it encouraged and supported city commercial banks to actively introduce overseas strategic investors and conduct listing and joint restructuring with city commercial banks.
Advantages, difficulties and risks of investment and shareholding methods
In the medium and long term, foreign-funded financial institutions are unlikely to be satisfied with holding only a few shares of participating banks as strategic investors, but will try their best to strive for absolute or relative controlling position. Even if holding cannot be realized temporarily, foreign banks will exert greater influence on participating banks by sending directors and other senior managers, so as to better serve their overall strategic objectives in China. Judging from the existing strategies for foreign banks to invest in stocks, they can be roughly divided into the following ways:
1. Relatively holding, controlling the board of directors and implementing process reengineering.
A Case Study on Xinqiao Investment of Shenzhen Development Bank
The process of the new bridge entering SDB is full of twists and turns. In the end, the shareholding ratio of Xinqiao was 65,438+07.89%, making it the first foreign-funded commercial bank in China and a listed national joint-stock bank. In 2004, the first extraordinary general meeting of shareholders held in Shenzhen Development Bank elected 65,438+05 new board members, among which 65,438+00 non-independent executive directors, 5 were from Xinqiao. Two of the five independent directors are foreign bankers. Obviously, Xinqiao has an advantage in the new board of directors.
After Xinqiao entered the Shenzhen Development Bank, it has begun to transform the bank: First, optimize the organizational structure and staffing. After Xinqiao Holdings, it spent a large sum of money to invite an international consulting company to investigate the presidents of various branches and implemented changes in the middle and high levels. After retaining some suitable personnel appropriately, Xinqiao is likely to re-employ professional managers around the world. The second is to strengthen risk decision. SDB recruits 1 general manager of the Risk Management Department of the Head Office, 4 full-time members of the Risk Review Committee of the Head Office and several credit supervisors of branches or business lines for the whole country. The core of recruitment is to establish a vertical control chain of credit business from the executive director of credit risk of the head office to the senior credit supervisor of branches or business lines. The risk control department of the bank will be relatively independent, and Xinqiao will form risk control and mutual restriction on the business activities of various internal functional departments and their staff, and finally establish an effective restriction mechanism between credit executives and branch presidents.
Advantage Analysis This is the most anticipated way for many foreign financial institutions to enter the banking industry in China. Foreign-funded financial institutions can carry out their own business philosophy through their favorable position in the board of directors and management, completely transform banks, and truly become banks with international advanced management level.
Difficult point analysis
A. the requirements of participating banks are more stringent. Shareholders' equity must be dispersed, and it may be necessary to buy equity from more than one shareholder, so the negotiation cost is high.
B.it must be supported by the government. The financial industry has always been regarded as an area that the government should control, and the transfer of controlling shares is obviously very cautious.
C. there should be supplementary provisions on going concern enterprises. For China's imperfect financial market, speculative short-term operation has always been unpopular.
D. It is a challenge to price equity and accurately grasp the real situation of non-performing assets.
Risk analysis
A. It may lead to the strongest rebound of China management. During the whole process of SDB transaction, the relationship between the senior management of the former board of directors and the transferor was very tense, which led to the deadlock in the negotiations.
B. subject to strict supervision by the authorities.
2. The board of directors of the main bank seeks the right to speak, exports advanced management experience and business philosophy, and reconstructs the bank, thus enhancing its control.
Case HSBC Shanghai Bank
200 1, 1, in February 2006, HSBC bought 8% of the shares of Bank of Shanghai for US$ 62.6 million, becoming the second largest shareholder after Shanghai State-owned Assets Management Co., Ltd. Before that, IFC had brought substantial influence to Bank of Shanghai through comprehensive entry and multi-level penetration chosen by HSBC.
HSBC sent a director to the board of directors (IFC, another shareholder, also sent a director) and often voted against the bank's blind expansion of assets regardless of capital constraints, which made Shanghai Bank accept the concept of capital management earlier and achieved steady development. HSBC has also cooperated with Shanghai Bank in banking governance, organizational structure, marketing, service and brand building. Referring to the practice of HSBC, Shanghai Bank set up a "call center". At present, Shanghai Bank is undergoing a thorough reform of its organizational system and business process, and will form a flat, intensive, professional and matrix organizational structure. The head office will face more than 200 outlets at the same time, and these branches will become outlets that provide consistent services and simple sales and counter services. At the same time, they will develop their business and product marketing by setting up multiple marketing centers and establishing an account manager system. By the end of 2003, the capital adequacy ratio of Shanghai Bank reached 10.6%, and the non-performing loan ratio was only 3%.
Advantage analysis
Most foreign-funded financial institutions have adopted this strategy when entering small and medium-sized financial institutions such as city commercial banks, but they have not achieved a controlling position in equity. The advantages of this model are:
A. You can use your own advantages to exert influence on the company, better implement your own business philosophy, and make the bank quickly change its operating mechanism and improve its management level.
B. Under good running-in conditions, both parties can control the bank in an all-round and multi-level way, slowly implant their own genes into the bank, take advantage of their own advantages in management, technology and global network, gradually master the main control rights, and realize holding by increasing capital and shares at an appropriate time.
Difficult point analysis
A. obtain the full support and cooperation of shareholders. Although most banks express their hope that foreign financial institutions will bring advanced experience when introducing foreign capital, when foreign financial institutions fully intervene in the company, they will inevitably encounter different resistance. At this time, they must get the full support and cooperation of shareholders.
B. Require foreign-funded financial institutions to have sufficient management experience. Banks in China are rooted in the corporate culture of China. Under the condition that the equity is not dominant, foreign financial institutions must have convincing experience if they want to exert all-round influence on banks through intervention.
C. Require board members and senior executives stationed in banks to have strong control. Personal ability often shows weight in key situations. For example, John Dexter Langlois, director of the International Finance Corporation of Shanghai Bank and Nanjing Commercial Bank, is an expert on China. He is never afraid to have a heated debate with the board of directors, so he can have a great influence on the top management of banks.
Risk analysis
A. It may conflict with shareholders in business philosophy and culture. The deep involvement of foreign shareholders will inevitably affect the deep-seated conflicts and disputes between banks and shareholders. If this conflict is not handled properly, it will lead to the marginalization of shareholders.
B. handle the relationship with the local government. Regarding the orientation and development direction of city commercial banks, the opinions of local governments often have more say. If the relationship with local governments is not handled well, the development of banks may be affected. In addition, the major personnel appointment and removal rights of domestic banks are still in the hands of the government.
3. Deeply involved in and controlled a certain business of the bank, and gradually extended to other levels of the bank.
Case Study Citibank-Shanghai Pudong Development Bank
At the end of 2002, Shanghai Pudong Development Bank and Citibank reached an agreement to form an exclusive strategic partnership. The contents of the agreement include cooperation in equity, credit card business and risk control. In terms of shareholding, Citigroup is divided into three steps: the first step is 5%; The second and third steps are that before 2008, if the policy allows, Citigroup can increase its holdings to 14.9%, and ultimately it will not exceed 24.9%.
But for Citigroup, the focus of the whole cooperation is almost on the credit card business. The credit card center of Shanghai Pudong Development Bank is nominally located under the Shanghai Pudong Development Bank, but it is actually a semi-independent operation center operated by the company. Once the policy allows, the credit card center will definitely be independent and set up a joint venture company. Prior to this, both parties shall bear equal risks, rights and obligations. According to the agreement, Citigroup provides technology and management. At present, all staff salaries are paid in the credit card center and included in the cost of Shanghai Pudong Development Bank. The CEO of the Credit Card Center and the chief positions of the four departments are all from Citigroup, while the deputy directors are all from Shanghai Pudong Development Bank. The CEO reports to the Credit Card Center Management Committee composed of Citigroup and Shanghai Pudong Development Bank. In addition, Citigroup also provides the latest version of the business system within the group, and all data processing is concentrated in Citigroup's Asia-Pacific data processing center in Singapore. In terms of management, Citigroup has also exported a more experienced team.
Different from the substantial participation in credit cards, Citigroup has not invested much in other aspects of cooperation with Shanghai Pudong Development Bank for the time being, but only provided some technical help. In the personal business that Citi is good at, Citi has not cooperated and participated in product development.
Advantage analysis
The cooperation between Citigroup and Shanghai Pudong Development Bank in credit card business is a typical case of foreign banks' equity participation strategy. The advantages of this participation mode are:
A investors can directly enter the market of a specific business in the fastest and most effective way. It is entirely possible for foreign banks with technological and product advantages to take advantage of the advantages of Chinese partners in joint ventures to catch up. For example, Citigroup uses its own experience and combines the local advantages of Shanghai Pudong Development Bank. After in-depth cooperation, the two sides can quickly gain a dominant position in this new field where Chinese banks in the mainland have just started.
B. When the policy situation breaks through, you can quickly transfer to the joint venture company to carry out business without going through the transition period. Although Citigroup apparently gave up the status of independent card issuing in Chinese mainland, it has successfully obtained the control of Pudong Credit Card Center. Once the future policy is broken, it will definitely be transformed into a joint venture company.
C. avoid conflicts of interest with the original shareholders at the company level. This model often only limits cooperation and control to some new fields that have just started. Through a series of institutional constraints in this local area, foreign investors can gain a controlling position more favorably, thus avoiding conflicts with Chinese shareholders.
Difficult point analysis
A. Require investors to be more authoritative in this business: In the immature financial market in China, foreign investors must be required to have strong advantages in this business in terms of experience, risk control ability and operation mode, so as to convince China.
B the business is required to have new business growth points and great development potential, and be technically independent of various businesses of the Bank, with definite distinction.
risk assessment
A. the market prospect of this business is uncertain. Once the specific business fails, it is difficult to continue to implement other further infiltration and control of banks.
B. controlling this business is difficult to penetrate the whole bank. Due to the imperfect corporate governance and internal control mechanism of China Commercial Bank, even if foreign-funded institutions succeed in this specific business, it may be difficult for them to set foot in other businesses.
C. For some local commercial banks, such as city commercial banks, due to the limitation of business scope, if you choose to intervene in this way, you will often be restricted.
In the process of investing in stocks
Other problems that may be encountered.
1. Pricing divergence
The important reference index of non-tradable shares transfer of listed companies in China is net assets per share, and there is no mature reference standard for the premium of bank equity transfer. In addition, many banks generally only draw general reserves at 1% of the loan balance, and the provision for non-performing assets is far below international standards.
During the investment process of Shenzhen Development Bank, Shanghai Bank and Xi 'an Commercial Bank, there were major differences because of the price issue. For example, in the negotiation of foreign investment in Xi 'an Commercial Bank, according to international accounting standards, Xi 'an Commercial Bank's net assets per share were much lower than 1 yuan -0.30 yuan at the end of 2003 and higher than 0.50 yuan at the end of 2004, but China insisted on selling at the level of 1 yuan per share. After tortuous negotiations, we finally adopted the "gradual shareholding". According to the shareholding agreement, foreign investors can increase the subscription ratio to 24.9% within four years after the initial shareholding, which is also the upper limit of foreign banks' shareholding, of which Ye Feng Bank holds 65,438+02.5% and IFC holds 65,438+02.4%. The foreign party has complete right to choose when to exercise the subscription right, and the subscription price is 1 yuan per share; The foreign party can not subscribe until the net assets per share audited by Xi 'an Commercial Bank according to international accounting standards reach 65,438+0 yuan.
2. Jurisdiction
The legal jurisdiction after disputes arise in the process of cooperation is also one of the equity disputes. For example, in the process of Citigroup's shareholding in Shanghai Pudong Development Zone, Citigroup insisted on applying American law and China applied China law, and finally decided to apply the law of the place of registration-China law. In case of dispute, the third party law-Singapore law shall apply. There was also a dispute between Xi 'an Commercial Bank and scotiabank, who finally accepted the application of China law.
Ways for Foreign Capital to Participate in China's Financial Market and Problems to Pay Attention to
1. Ways to participate in China's financial market in the short term.
Actively encourage qualified overseas financial institutions to participate in the banking industry in China. The main policy objectives are: first, to promote the adjustment of the property right structure of the banking industry; Second, seek new capital replenishment channels.
On June 8, 2003, China Banking Regulatory Commission issued the Measures for the Administration of Overseas Financial Institutions Investing in Chinese-funded Financial Institutions to encourage overseas financial institutions to invest in Chinese-funded financial institutions in the medium and long term. The Measures allow overseas financial institutions to participate in the restructuring and transformation of banking financial institutions in China on a voluntary and commercialized basis, and appropriately standardize the conditions and procedures for investment and shareholding, changing the previous practice of requiring foreign investors to declare their shares one by one, and reducing the differences and uncertainties between cases.
Therefore, among the three modes that foreign banks may choose, equity participation, joint venture and sole proprietorship, equity participation and joint venture are the most recognized by the government recently. Equity participation and joint venture can complement the advantages of foreign banks and host countries and achieve the goal of "win-win" At present, more than 50,000 rural credit cooperatives, many urban credit cooperatives and urban commercial banks are being reformed in China, and the opportunities in the middle are self-evident.
Cooperation with large traditional state-owned enterprises is a shortcut to enter the insurance industry in China. The vast majority of existing joint-venture insurance companies choose China's non-financial giants as partners, relying on the financial capital and market network of domestic monopoly enterprises to control the management rights. For these super-large state-owned enterprises, it is certainly a good choice to enter the financial field and internalize the expenditure on purchasing financial products abroad. Moreover, the huge group business market brought by the upstream and downstream industrial partners of these mega-enterprises to foreign investors is immeasurable.
The joint venture fund industry has broad prospects for development, and will also face strong market competition from China fund management companies. However, after the gradual relaxation of capital account control in China, if qualified domestic investors are allowed to buy and sell overseas investment products in foreign exchange, joint venture fund companies will have great advantages because they have foreign-funded institutions familiar with overseas markets.
2. Problems that foreign financial institutions should pay attention to when entering the China market.
Starting with the most urgent link in the development of China's financial market system. When foreign financial institutions enter the China market, they should objectively evaluate their competitive advantages and analyze whether their business advantages are urgently needed for the development of China's financial market. For example, agricultural insurance is a common practice to support agriculture rather than direct subsidies under the framework of WTO. At present, China lacks experienced companies in this field, so excellent agricultural insurance companies will naturally be favored.
Give full play to the institutional advantages of mixed operation. At present, China is in the process of changing from separate operation to mixed operation, and the emerging domestic financial holding company is a representative platform. In this regard, foreign financial institutions have usually accumulated some experience. If we can give full play to the advantages of the mixed operation system and develop financial products that meet the market demand, it will not only promote the transformation of China's financial system, but also have positive significance for China's financial innovation and foreign financial institutions to expand their living space.
Choose partners carefully. At present, there are three backgrounds for foreign investors to choose Chinese partners: political background, international background and capital background. Foreign investors believe that choosing such a China enterprise will enable the joint venture company to obtain some direct or indirect benefits under the specific social environment in China. Because they have experience in international cooperation and international market, and these enterprises are the strongest enterprises in China, it is easy to exchange management ideas. However, under the current market environment in China, there are few enterprises with these three backgrounds at the same time, which makes it difficult for foreign investors to choose partners that can match them.
Realize the localization of talents, financial products and financial technology as soon as possible. Because financial products are social products, not simple scientific and technological products, their survival must depend on a certain social and market soil and must adapt to the unique cultural, legal, capital market and other environments of this soil itself. After entering the China market, foreign companies must invest a long time to understand the local market, collect data, design products, establish product sales networks and train sales personnel. Especially for insurance companies, the degree of localization is an important progress that directly affects their smooth development in China.
(Author: Deputy Director and Doctoral Supervisor, Institute of Finance, the State Council Development Research Center)