How to Set-up a QFII Custodian Business

In order to facilitate the implementation of the December 1 2002 Administration of Securities Investments in China by Qualified Institutional Investors Tentative Procedures (the QFII Tentative Procedures) the People's Bank of China (PBOC) issued the Issues Relevant to the Application by Commercial Banks for Engaging in the Custody Business of Domestic Securities Investments by Qualified Foreign Institutional Investors Circular (the Circular). The Circular specifies the requirements and procedures regarding the ways that a commercial bank can apply to the PBOC for permission to undertake a custodian business for domestic securities investments by qualified foreign institutional investors.

The starting point for the new regulations is classification of commercial banks. The Circular generally classifies all banks as either: locally funded commercial banks (Sino Banks); or wholly foreign-owned commercial banks, joint venture commercial banks and foreign bank branches (collectively, Non-Sino Banks).

Sino Banks