Standard Chartered China has become the first foreign-invested bank to apply for fund custodian status in the wake of an easing of restrictions on ownership and business operations by overseas players in the financial sector.
The official website for the China Securities Regulatory Commission (CSRC) indicates that Standard Chartered China submitted materials to the regulator on 8 June to apply for fund custodian status.
The bank is the first foreign-invested lender in China to submit an official application to become a fund custodian, following media reports that a number of financial institutions have harboured similar ambitions.
The “Securities Investment Fund Custodian Business Administrative Measures (证券投资基金托管业务管理办法) stipulates that commercial banks that serve as fund custodians must posses net assets of at least 2 billion yuan over each of the past three accounting years, and that capital adequacy ratios and other key risk indicators meet the relevant thresholds outlined by regulators.
Commercial banks must also establish specialist fund custodian departments that are capable of ensuring the completeness and independence of custodian business, while at least half of personnel in the department must possess official qualifications to work in the fund industry.
Fund custodian departments must possess at least eight qualified professional staff to engage in fund settlement, investment monitoring, information disclosure and internal inspection and control operations, while key staff responsible for monitoring and other core operations must possess two years of experience with fund custodianship.
Industry insiders say that fund custodianship fees have risen in recent years following an ongoing expansion in the number and scale of publicly offered funds in China, drawing a greater number of financial institutions to the market.
As of the end of April 2018 a total of 43 institutions had obtained qualifications to serve as fund custodians in China, of which 27 were commercial banks.
According to the 2017 Fund Annual Report, funds run by 122 companies paid a total of 12.2 billion yuan in fund custodian fees in China last year, for an increase of 1.1 billion yuan compared to 2016.
The China Construction Bank, China CITIC and Industrial and Commercial Bank of China were amongst the lenders reaping the biggest rewards.