LONDON (Reuters) - Britain’s possible relaxation of rules for Chinese banks wanting to set up in London was called into question on Wednesday by the chairman of an influential parliamentary committee that scrutinises the country’s finance ministry.
Lawmaker Andrew Tyrie wrote to the Prudential Regulation Authority - part of the Bank of England - to check it had been properly consulted about Tuesday’s announcement of steps to boost Britain’s role as an offshore hub for trading in China’s currency and bonds.
“Clarity is needed about whether conditions have been attached and whether such conditions constitute a change in policy,” Tyrie said in the open letter sent to media.
“I would be grateful for an assurance that any change is not specific to a particular country and that you were not put under any undue pressure to agree to something about which you may have had concerns.”
Finance minister George Osborne said on Tuesday that the PRA would start talks with Chinese banks seeking to set up wholesale banking branches in what could represent an easing of regulations imposed after the financial crisis.
Chinese banks were reported to have complained last year that rules imposing tight standards on capital and liquidity made it hard to operate in Britain, prompting them to move much of their business to Luxembourg.
Since the financial crisis, Britain has required most overseas banks to set up their UK operations as subsidiaries rather than branches, thereby providing greater protection for depositors and taxpayers.
Subsidiaries have to comply with tight standards on capital and liquidity, while branches are treated as extensions of the overseas bank, leaving the British regulator with limited control.
A Treasury spokesman said on Wednesday the PRA was an independent body and the decision to begin discussions with Chinese banks had been taken independently.
A Bank of England spokesman said the central bank would respond to Tyrie’s letter in due course.
(The story changes tense in penultimate paragraph to make clear decision to begin discussions already taken.)
Reporting by William James, Steve Slater and Costas Pitas; editing by William Schomberg and Tom Pfeiffer