Financial Services Working Group Meeting

2017-02-06 | All chapters

The participants had particular interest in discussing the recent capital control measures applied by China.The working-level meeting on financial services focused on short-term issues instead of the long-term issues of the position paper.

The Chair of the Banking & Securities Working Group mentioned that communication from financial regulators is an issue of concern both for the channels/way and for the fact that many times it’s unclear. This together with vague/broad regulations means that banks face many compliance challenges.

China is not able yet to deal with volatility. In fact, this is probably the biggest problem that China is facing right now.

Another issue is the fact that Beijing sets kpis/quotas and the officials in other cities have different interpretations and therefore there is not a consistent implementation across of the country.

It was also discussed that PBOC have ways to punish those banks which not comply with the quotas. For instance, they could downgrade a bank and this would affect their interest rate/ RR.

During the meeting, it was also discussed the difficulties of branch development for foreign banks in China which have the effect of a slower branch expansion in comparison to domestic peers. But closing branches is also an issue that poses many challenges as government authorities set many obstacles.

EC officials mentioned that a general point that can be taken from the discussion is the transparency issues faced in the Chinese market. The EC is working to include clauses which will tackle this issue in the CAI.