More rules for China banking: Another barrier to entry?

It seems as if they keep coming up with more and more rules. China will give foreign banks operating in the country a grace period of five years to meet domestic loan-deposit ratios when they incorporate locally under new rules.

Overseas banks must meet the requirement that loans have to be no more than 75 percent of deposits by Dec. 31, 2011, the China Banking Regulatory Commission said on its Web site. Their loans in China exceeded deposits by $54.9 billion to $33.4 billion at the end of September, according to a statement from the regulator on Nov. 16.

Foreign banks in China will have to incorporate locally to offer yuan-denominated bank cards and mass-market banking services under the new rules issued on Nov. 15. The nation will remove all geographic and business restrictions on foreign banks on Dec. 11, under commitments made when it joined the World Trade Organization in 2001.

Overseas lenders are eager to offer local-currency loans, mortgages and credit-card services to spur expansion in China's $5.1 trillion industry. Their growth in the nation so far has been hampered by operating restrictions and a branch approval process that typically takes six months.

Foreign banks won't be allowed to lend more than 10 percent of their equity to one single borrower after Dec. 31 2009, according the announcement. During the three-year grace period the limit is set at no more than a quarter.

Will these new restrictions hinder new banks from setting up shop in China? Or will the pull of China's rapidly-expanding economy be strong enough to attract more foreign banks?

Let us know what you think.