China's financial services regulator has awarded the Chinese subsidiary of Citibank a domestic fund custody license that will allow the bank to hold securities and sell related custody services to China-based mutual funds and private funds.
The license granted to Citibank (China) Co. allows Citi China to act as a custodian bank and hold securities on behalf of mutual and private funds in China. Citi China will also be able to offer custodian services such as record-keeping, trade settlement and income processing.
This decision by the China Securities Regulatory Commission (CSRC) makes Citi the first U.S. bank and the first of the top five global banks to receive this license. The license, however, is conditional and will only be made final if Citi passes the CSRC's inspection later this year. Citi made the announcement Wednesday after the license was granted last week.
Christine Lam, Citi China president and CEO, said the bank was "proud" to be granted the first custodian license in China among American rivals. She said there are "tremendous opportunities for global players to participate" in reforms.
David Russell, Citi's Asia Pacific head of securities services, said that Citi has "invested significantly in our Securities Services operations in Shanghai, and we plan to continue building up our local capabilities to meet our clients' increasing demand in China, such as fund administration and other outsourcing services."
The CSRC license continues China's financial sector reforms over the past two years. These reforms are seeing China relax ownership restrictions and granting business licenses to American financial institutions despite worsening political ties due to the Trump administration's anti-China rhetoric.
The past three months have seen major moves into China by American financial giants. On June 13, American Express's joint venture with LianLian DigiTech in China received central bank approval to clear local bank card transactions.
On Aug. 21, New York city-based BlackRock, Inc., the world's largest asset fund manager, received approval to set up a wholly owned asset management business in China, the CSRC said. BlackRock has six months to establish the company, which will have a registered capital of $43.9 million.
There was confirmation last week that JPMorgan Asset Management, the funds arm of the biggest U.S. banking group by assets, intends to pay $1 billion to buy out the remaining 49 percent owned by its joint-venture partner, China International Fund Management. JP Morgan shares joint ownership of this firm with Shanghai International Trust, a subsidiary of state-owned Shanghai Pudong Development Bank.
