PBOC Clarifies Issues Concerning Custodianship for Domestic Securities Investment by QFII


Following the promulgation of the Provisional Measures on Domestic Securities Investment by Qualified Foreign Institutional Investors (QFII) on 5th November 2002, the People's Bank of China (PBOC) has recently issued a circular to clarify certain issues surrounding the custodianship for domestic securities investments by QFII.

According to the circular, in order to secure custodianship, wholly foreign-owned banks, Sino-foreign joint venture banks and the branches of foreign banks must submit the following documents to the local branch of the PBOC for preliminary approval:

  • an application signed by a signatory duly authorised by the applicant's head office with respect to the custodianship;
  • a detailed description of the proposed business and the preparations undertaken for the proposed business, including operational procedures, risk-profit analysis, control measures, the recruitment of professional staff as well as computer system set-ups; and
  • other information that PBOC may request.

The application is subject to the final approval of the PBOC.

The circular also stipulates that only one of the branches set up by every foreign bank, and only the head office of wholly foreign owned banks or Sino-foreign joint venture banks are allowed to carry out custody business in relation to the domestic securities investment of QFII. A commercial bank which has been approved by PBOC to conduct custody business is not required to have its Financial Business Licence changed or to make any announcement in that regard. However, it should still apply to the China's Securities Regulatory Commission, the regulator of China's securities sector, for custodian qualification on the strength of PBOC approval.

If you need more information about the circular, please contact Luke Filei on +86 21 628 96363 or at [email protected].