HSBC Custody and Clearing in Hong Kong confirmed today that it had joined Citibank and Standard Chartered in being among the first foreign banks to receive approval from the Chinese authorities to act as a custodian in mainland China on behalf of Qualified Foreign Institutional Investors (QFIIs).
The licence will allow HSBC to handle QFII applications; put QFII portfolios in custody; service the portfolio with foreign exchange and Renminbi clearing, securities and cash settlement services; supervise QFII investment operations and provide reports of any breaches to the appropriate regulators; report to regulators about QFII investment activities, foreign currency remittances, foreign exchange conversions, capital receipts and other activities through QFII Renminbi accounts; and provide financial reporting services and compliance services to QFIIs.
“As HSBC is the only foreign bank currently providing onshore B-share custodian services in mainland China, once full approval is received, the new licence will allow us to expand our current services in the B-share market to encompass the A-share market,” says Nick Bryan, Head of Custody and Clearing for HSBC. “The opening of the A-share market marks a significant development for QFIIs and custodians in China. Our custody and clearing business has been consistently top-rated and ranked No. 1 in China and we look forward to extending our quality services and expertise to our QFII customers.”
HSBC says that the further necessary approvals from the China Securities Regulatory Commission and the State Administration of Foreign Exchange Control (SAFE) are expected within the next few weeks.
QFIIs are overseas fund management institutions, insurance companies, securities companies or commercial banks which are authorised by China’s regulators to invest in A-shares and treasury bonds listed on the Shenzhen and Shanghai stock exchanges. China’s A-share market is currently capitalised at around US$500 billion.
HSBC’s sub-custody and securities clearing business in China was top-rated and ranked No.1 in by Global Custodian in its annual Review of Agent Banks in Emerging Markets for 2002. HSBC also has a sizeable branch network in mainland China, with branches in Beijing, Dalian, Guangzhou, Singdao, Shanghai, Shenzhen, Tianjin, Wuhan and Xiamen, a sub-branch in Puxi, Shanghai and representative offices in Chengdu and Chongqing.