A provisional regulation governing charging standards of services by commercial banks has been issued by the China Banking Regulatory Commission (CBRC), ending more than a year of controversy around whether Chinese banks should ask for cash for their services.
Foreign banks such as Citibank started to charge for certain personal forex accounts last year, triggering heated discussion on whether local banks should follow suit to make up a competitive disadvantage.
The CBRC issued a circular on Thursday allowing commercial banks, including foreign banks operating in China, to begin charging for their services on October 1.
But it noted that services like reminbi deposits and withdrawals under 50,000 yuan (US$6,000) should remain free of charge.
"Chinese banks now have a lot of operations that are off the balance sheet and there are also costs," said Huang Jinlao, a researcher with the Institute of International Finance at the Bank of China.
"So there's nothing to criticize. And it's commonplace in other parts of the world."
The CBRC said the main reason for the new rule was to regulate the charging behaviour of commercial banks after the disorder that followed the promulgation of a regulation in 2001 that encouraged banks to provide off-the-balance-sheet "intermediate" services.
A lack of regulatory reference has existed for a long time because Chinese banks developed new services to beef up competitiveness and boost profitability.
Analysts say some bank services are charged at high rates but others, such as salary account transfers that an increasing number of corporations offer to their employees, are provided for free by banks to attract deposits.
As more charges for services are given the green light, commercial banks will begin to focus on brand-building rather than merely undercutting each other, analysts state.
"There will be more fees charged," said Huang. "But there is unlikely to be much vicious competition."
The CBRC banned the emergence of any coalition that could artificially fix the prices. It has also stressed the fees that commercial banks can charge should be higher than their costs in providing the services.
In an effort to protect individual bank clients, the commission said "government-guided prices," mostly price ranges, would be introduced in many popular settlement services like remittances and checking.
"Market-determined prices" will dominate in areas like foreign exchange services, it said.
Some clients have complained about the possibility they will soon be paying for withdrawals larger than 50,000 yuan (US$6,000), which are becoming increasingly frequent as the Chinese people are becoming significantly better off.
"Only if they agree to deliver the cash to my home. Otherwise why should I pay them without getting a safer service?" said Liu Ling, a 32-year-old Beijing resident.
(China Daily June 28, 2003)
