Citibank has confirmed that it received a domestic fund custody license from the China Securities Regulatory Commission (CSRC), which makes Citi the first American bank and the first bank among the top five global custodians to be granted such a license. This license will enable Citi to provide custody-related services to both mutual funds and private funds domiciled in China, after passing CSRC’s onsite inspection later this year.
Citi says it has been providing cross-border securities services for more than 20 years in China, becoming the benchmark service provider as the country’s capital markets evolve, and has fully participated in the development of China’s QFII/RQFII, QDII/RQDII, CIBM and Bond Connect schemes, including policy recommendation, investor education, and market advocacy.
In 2019, China announced details to allow foreign entities to own 100% of securities, futures, fund management and insurance businesses in China. In anticipation of an influx of global financial institutions setting up in China, where the aggregated scale of assets managed in mutual funds, wealth management products and other schemes now reaches approximately US$16 trillion, Citi said it has been investing heavily in its local custody, clearing and fund services capabilities.
“As the first American bank to be granted a domestic fund custody license, we’re proud to be able to help our global clients gain access to China’s capital markets which are experiencing a new round of comprehensive reforms,” said Christine Lam, President and Chief Executive Officer of Citi China. “There are tremendous opportunities for global players to participate. Citi is well positioned to help them navigate these potential opportunities.”
From April 1, 2020, global fund managers have been able to apply to the CSRC to own 100% of their Fund Management Company, which enables them to create and distribute mutual funds to the retail investor market in China, which at March 31, 2020 exceeded an estimated US$2.3 trillion in assets.
Analysts say China’s markets offer vast opportunities for global market participants, but it remains complex and requires careful navigation. “This license is further validation of China’s commitment to continue to open up its financial markets,” said Stuart Staley, Head of Markets and Securities Services, Citi Asia Pacific.
This license allows Citi to offer its global platform, best practices and risk control framework to China, and make a further contribution to supporting the continued development of Chinese financial markets.
“Citi’s China domestic fund custody license is great news for our global clients. As international fund managers, securities firms, and insurance companies set up in China, we believe they will want a trusted service provider to help them mitigate risks and reduce costs,” said David Russell, Citi’s APAC Head of Securities Services. “We have 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,” said Russell.