China banks leaving London to escape tougher rules: FT
Chinese banks are shifting the focus of their European business away from London toward Luxembourg as they seek to escape tougher British regulation, the Financial Times said on Monday.
The newspaper said Chinese banks had complained to the British government over what they called uneven regulation and "rigorously demanding" liquidity rules in a recent letter.
"They are finding it increasingly difficult to operate in the UK under the current regulatory environment," the banks said in the letter, which was sent on their behalf by the Association of Foreign Banks, according to the Financial Times.
State-owned banks, including Industrial and Commercial Bank of China <601398.SS>, China Construction Bank <601939.SS> and Agricultural Bank of China <601288.SS>, have all set up shop in London since the global financial crisis, it added.
The Financial Times quoted the letter as saying one Chinese bank already routed three times more business through Luxembourg than London, and several others planned to manage its European operations from Luxembourg, known for lighter regulation.
Chinese banks' main problem is that Britain's Financial Services Authority refuses to allow them to set up branches in London, the paper said. The watchdog had allowed many fewer branches since 2008, especially in cases where it was unsatisfied with regulatory levels in the home country.
Chinese banks operate in Britain via subsidiaries, which are regulated in the same way as a local bank - with tight standards on transparency, capital cushions and liquidity buffers, the newspaper said. Branches, however, were extended arms of overseas banks over which the UK watchdog had limited control.
(Writing by Mark Bendeich; Editing by Eric Meijer)