The new rules take effect on December 11. The CBRC is expected to publish more details soon on local incorporation of branches which foreign banks need to submit to compete on a more equal footing with domestic banks.

Banks incorporated locally will be able to perform yuan banking without any limits on the amounts involved and to issue credit and debit cards. Unincorporated banks will be allowed to accept deposits of more than one million yuan and will not be able to issue credit and debit cards.

Only foreign banks that accept deposits will be allowed to lend and the lending will not be allowed to exceed 75 per cent of the amount they are holding in deposits.

Many foreign banks are starved for deposits and to get money to lend, must depend on cash injections from their parent companies or loans in the interbank market. Rasing their deposits to an acceptable level will take time.

"The business of overseas banks will not be affected during the grace period," Mr Huang said. While the incorporation process is going on, foreign banks will be able to function as before, he said.

Overseas banks may continue to face uncertainties in the bank card market. The drafting of new bank card regulations began three years ago and is still not complete. Until it is, foreign banks will not be able to issue cards.

"The bank card rules will not come out before December 11 as far as I know," Mr Huang said.

Some foreign banks that are strategic investors in domestic banks have set up joint credit card operations with Chinese partners.

1

2

(For more biz stories, please visit Industry Updates)