SBP grants banking licence to Bank of China

Chinese bank will initially invest $50m, meet financing needs of CPEC projects

KARACHI: The State Bank of Pakistan (SBP) has issued a banking licence to Bank of China, which will commence its business in branch mode after meeting other regulatory requirements.

The bank will initially bring $50 million to fulfil the minimum capital requirements of the SBP. The long-term objective of Bank of China is to increase its market penetration by opening branches in major cities of Pakistan, aiming to be one of the largest foreign banks in Pakistan.

Analysts say the interest of Bank of China in Pakistan shows it wants to play an important role in financing large infrastructure projects that are expected to be completed under the $57 billion China-Pakistan Economic Corridor (CPEC) in the next decade or so.

"Bank of China is coming here to gain benefit from CPEC-related projects," Invest and Finance Securities CEO Muzammil Aslam commented.

He, however, said that the initial $50 million amount is not enough, which means that it will gradually increase investment in Pakistan.



There are many companies in Pakistan that need financing and Bank of China must be looking for such opportunities. In future, the borrowing needs of these companies will grow and Bank of China will try to grab those openings, he added.

Bank of China aims to provide differential and specialised banking services to effectively serve the financing needs of CPEC-related projects by leveraging on its experience and global technology platform, according to a SBP press release.

Meanwhile, Finance Minister Ishaq Dar met Bank of China Chairman Tian Guoli at its headquarters on Saturday and conveyed the official approval in this regard.

Bank of China will open its branch in Karachi soon and gradually expand its network to other cities. It may be added that Tian, in his last visit to Pakistan, had expressed the desire for launching banking operations in Pakistan and sought the SBP's permission, according to a press release of the Ministry of Finance.

Dar welcomed the decision by Bank of China to commence banking operations in Pakistan. He also extended invitation to Tian to visit Pakistan and himself inaugurate the first branch of the Bank in Karachi, for which an event would be held soon.



The finance minister was extended a warm welcome on arrival at the Bank of China headquarters by Tian and other senior officials.

During the meeting, Tian and members of his team praised the economic turnaround and stability achieved by Pakistan and expressed appreciation that the economic indicators were moving in the right direction. He also thanked Dar for conveying him the permission for setting up the Bank of China Branch in Pakistan.

Bank of China is a subsidiary of China Central Huijin, an investment arm of the government of China.

Bank of China is not only operating in the Chinese main land, but its footprints have reached 50 countries. 19 of those countries are located across Chinese "One Belt One Road" initiative. At the end of 2015, the bank had a total of 11,633 institutions including 644 in overseas markets.

It is the fourth and fifth largest global bank in terms of Tier-1 capital and total assets respectively. It is listed on the Shanghai Stock Exchange and the Hong Kong Stock Exchange.

It will be the second Chinese bank entering Pakistan, which represents growing confidence of international investors in the country's banking sector and a stable economic outlook.