Credit Suisse Gets Nod for Majority-Owned Securities Business in China

Credit Suisse has received final regulatory approval to purchase the shares needed for a majority equity stake in its Chinese securities venture Credit Suisse Founder Securities Ltd (CSFS). The lender will hike its stake to 51 percent from 33.3 percent via a capital injection as authorities in the mainland push ahead with their promise to open the country’s financial system.

Under the deal, the stake held by the Swiss bank’s Chinese partner, Founder Securities Co Ltd, will fall to 49 percent.

Swiss rival UBS Group was the first foreign-controlled brokerage to get approved by the securities regulator to upgrade its ownership in a local joint venture to controlling stake since the mitigated rules were implemented in late 2017. The Swiss bank applied to raise the stake in its China venture, called UBS Securities, to 51 percent, up from the previous 25 percent.

JPMorgan has also applied to win an auction to purchase the shares needed for a majority equity stake in its Chinese futures joint venture. The lender was bidding for 5 percent of J.P.Morgan Futures Co., a joint venture between the bank and its local partner.

China finally allows full foreign ownership

Separately, JPMorgan in August bought a majority stake in its Chinese mutual fund business. The deal, which is also pending regulatory approval, values the entire asset manager at $1.7 billion. At the time, it said the ultimate goal was to develop its mainland business into a full-fledged offering that will form a core part of its strategy in Asia.

Having originally applied for this permission in May 2018, JPMorgan has become the fourth global lender and first US bank to take full advantage of Beijing’s latest commitment to ease foreign-ownership restrictions.

Chinese regulators said they would continue to approve foreign firms’ control of their joint ventures as these licenses are a key part of China’s pledge to open its $40 trillion financial markets. The policy relaxation allows foreign investors to own as much as 51 percent of their securities ventures, up from the current 49 percent ceiling.

Other global investment banks, including Morgan Stanley, also seek a controlling stake in its Chinese business under new rules. Having spent years operating with limitations, where they were not authorized to surpass a 49 percent limit, many banks signaled a desire to take majority stakes in their Chinese ventures in order to expand their mainland’s business.