International Finance

China grants Deutsche, BNP Type A banking licence

The Type A licence will allow the two foreign banks to become a lead underwriter for corporate debt

China has granted two foreign banks ‘type A’ licences to act a lead underwriters for corporate debt issued by non-financial institutions, media reports said. Deutsche Bank and BNP Paribas are the two foreign banks issued Type A licences in China.

China’s decision to issue the Type A licence stems from its efforts to make market advancements as US-China trade war looms. A notice posted on the National Association of Financial Market Institutional Investors observed that six banks pursued a ‘Type A’ licence at the end of August.

In the second quarter, Chinese banks showed an increase in bad debts and a decline in capital adequacy ratio. The total non-performing loans in China’s banking sector reached $316.6 billion during the second quarter. This reported an increase of 3.6 percent from the first quarter.

Louis Tse Ming-Kwong, managing director of VC Asset Management told South China Morning Post, “The increase in loan provisions for the second quarter is not surprising given the dire need of small and medium-sized companies in mainland China to raise capital.”

For Chinese banks, the prospects remain cautiously optimistic as the bank loan level representing 300 percent of GBP is high but manageable, Tse said.

The country’s total debt to GDP ratio surged to 249.4 percent in the first six months of the year, according to the National Institution for Finance and Development. The surge in debt ratio by 5.8 percentage points in the first half reflects a change in Beijing’s policy priorities, media reports said. The country’s debt to GDP ratio is used to measure economic health.

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