[Exclusive] NongHyup Bank Raises First Business Flag in China... Approval Expected Early Next Year (Comprehensive)

Submission of Preliminary Application for Branch Establishment to Chinese Financial Authorities
Preliminary Approval Expected by Early Next Year at the Latest

[Asia Economy Reporter Park Sun-mi] NH Nonghyup Bank is taking its first step into the Chinese market next year. Nonghyup Bank recently submitted a preliminary approval application to the Chinese financial authorities for establishing its first branch in China. The preliminary approval is expected to be granted by early next year at the latest, and after completing the necessary formalities for the final approval, the first branch is expected to open around the end of next year.

According to the financial industry on the 18th, Nonghyup Bank successfully submitted the preliminary approval application for branch establishment last month to the China Banking and Insurance Regulatory Commission (CBIRC), the Chinese financial authority. The application was received by the Beijing branch of the CBIRC, a subordinate organization of the commission.

After Preliminary Approval, Final Approval Process
First Branch Expected to Open by End of Next Year

Under Chinese financial law, the preliminary approval for establishing a bank branch takes up to six months after the application is received. This means that the financial authorities could grant preliminary approval for the branch establishment by February next year at the latest. Since the CBIRC’s preliminary approval assesses whether Nonghyup Bank qualifies to enter the Chinese market, once preliminary approval is obtained, the final approval is essentially a procedural step. The CBIRC grants final approval within six months after verifying that the bank has secured appropriate premises, IT systems, and other requirements necessary for banking operations in China. This means Nonghyup Bank could open its first operational branch in Beijing next year.

Industry insiders consider the mere submission of the preliminary approval application to the CBIRC as having passed the critical 80% mark toward branch establishment. The acceptance of the application by the Chinese financial authorities indicates that all necessary documents for approval have been fully prepared, and such acceptance can only occur with active support from the Chinese regulatory authorities for the branch establishment.

Until now, Nonghyup Bank had entered the Chinese market only in the form of a non-operational office without banking services. Last summer, the bank began actively pursuing the conversion of its office into a branch. At that time, the president of Nonghyup Bank personally visited Beijing in August last year and met with senior officials of the Beijing CBIRC to discuss the branch conversion of Nonghyup Bank’s Beijing office. Since then, Nonghyup Bank has worked with the banking authorities to prepare the application, achieving the milestone of submitting the application within a year of starting the branch establishment process.

Internally, the bank has high expectations of starting operations in China from next year. This optimism is supported by the thawing of Korea-China relations following the COVID-19 pandemic and the resolution of past THAAD (Terminal High Altitude Area Defense) conflicts, as well as the Chinese government’s strong willingness to open its previously closed financial market.

Entry into China as a Branch, Not a Corporation
"Branch Operations Initially Easier than Corporate Form" Evaluation

Unlike major Korean banks that have entered China in the form of local corporations, Nonghyup Bank is attempting to enter as a branch, with expectations that it will be easier to conduct business with corporate clients in the early stages of market entry.

Currently, major Korean banks operating in China as local corporations can only provide corporate loans within 10% of the local corporation’s capital. However, by entering China as a branch, Nonghyup Bank’s capital in Korea serves as the basis, making it more advantageous for executing larger corporate loans compared to local corporations. On the downside, since it is not a corporate entity, retail banking operations are nearly impossible, and there are limitations on increasing the number of branches.

Meanwhile, Nonghyup Bank currently operates in six countries worldwide. Among these, it has local corporations only in Phnom Penh, Cambodia, and Yangon, Myanmar. It has entered Beijing, China; Ho Chi Minh City, Vietnam; and New Delhi, India in the form of offices. It operates branches in New York, USA, and Hanoi, Vietnam. Nonghyup Bank is also pursuing branch openings in Beijing, Hong Kong, Noida in India, Ho Chi Minh City, and Sydney, Australia. Nonghyup Bank and Nonghyup Financial Group plan to increase global business net profit to 16 billion KRW by 2025. To achieve this, they aim to expand their overseas network to 28 branches in 13 countries and strengthen business capabilities.

This content was produced with the assistance of AI translation services.