Nepal, China sign pact on cross border banking supervision cooperation
Wed, Mar 23, 2016 10:45 AM on Latest, Featured, External Media,
Nepal and China have signed a memorandum of understanding (MoU) to extend support on cross border supervision and exchange bank supervisory information between the two countries.
Nepal Rastra Bank (NRB) and China Banking Regulatory Commission (CBRC) signed the agreement during the official visit of Prime Minister KP Sharma Oli to China. The agreement, signed by the NRB Governor Chiranjibi Nepal and CBRC Chairman Shang Fulin on Monday, is expected to pave the way for bank and financial institutions (BFIs) of one country to open their branch offices in other country.
NRB had signed similar agreement with India's central bank, Reserve Bank of India (RBI), on September 14 last year.
"This is the second agreement of this type that we have signed to put in place legal arrangement to share information about BFIs from foreign supervisory officials on a reciprocal basis," reads a statement issued by the central bank.Banking experts say that the agreement between the two countries on exchange of supervisory information and cooperation is intended toward ensuring soundness of the banking and financial system. Former NRB Deputy Governor Maha Prasad Adhikari told Republica that signing of the agreement was a part of Nepal's commitment to meet the Basel principles on the supervision of cross-border banking adopted by Basel Committee on Banking Supervision -- a global body of banking regulators around the world.
"Basel principle requires countries to sign agreement on exchange of cross border information and supervisory cooperation between the countries that have presence of their banks in each other's country," said Adhikari. "The presence of some banks of Bangladesh, India and other countries through joint venture required us to sign agreement with these countries."
Adhikari opined that the signing of the agreement indicates that China and Nepal want to start banking business in each other country. "Signing the agreement does not necessarily mean that Chinese banks will come to Nepal. They should see business opportunity to come here. However, the agreement will create a foundation to start banking business in each other's country," he added.
The agreement is also expected to encourage BFIs to operate branch offices in each other's country.
"Though the Bank and Financial Institutions Act 2006 allows any foreign bank to open its office in Nepal, no such branch office has been opened in Nepal yet," said Bhaskar Mani Gnawali, former executive director at Bank Supervision Department of the NRB. "With the signing of such agreement, the banking authority of China will share supervisory information of BFIs of China in Nepal as it is the parent organization there, while Nepal will also do the same with China. It is a banking cooperation between two countries," he added.
Source: Republica
