Alfa Bank decided to open branches in Beijing and Shanghai

The largest private bank has prepared applications for registration of branches in Beijing and Shanghai, Alpha reported to RBC. The process of obtaining licenses will take at least six months, and may extend indefinitely, experts warn

Alfa Bank, the largest private bank on the Russian market, is preparing to open two branches in China - in Beijing and Shanghai, the credit institution told RBC. A set of documents required for registration will soon be submitted to the People's Bank of China. The corresponding decision was made by the board of directors of Alpha.

The director of large and medium-sized businesses of the bank, Vladimir Voeikov, explained that entering the Chinese market is due to the interests of clients who are “actively focused on the development of commodity-money relations with the PRC.”

“Alfa Bank has historically occupied a leading position in foreign economic activity, and developing business with China is strategically important for us,” he added. So far, the only Russian bank with a branch in China is VTB: it opened an office in Shanghai back in 2008.

Earlier, the chairman of the board of directors of Alfa Bank, Oleg Sysuev, told Vedomosti about plans for business development in China, but a decision on the format of presence in this market - in the form of a representative office or a branch - has not yet been made.

Alfa Bank is controlled by the Luxembourg ABH Holdings SA through the Cyprus structure ABH Financial Limited and the Russian AB Holding, the ultimate beneficiaries of which are businessmen Mikhail Fridman, Petr Aven and Andrey Kosogov (32.9%, 12.4% and 41% of shares, respectively) .

In addition to the Russian Alfa Bank, the structure of ABH Holdings SA also includes Alfa Bank in Belarus. Until July 21, 2023, it included the Ukrainian Sense Bank (formerly Alfa Bank Ukraine): the country’s authorities nationalized the credit institution due to sanctions against ABH Holdings SA and its shareholders. The Russian Alfa Bank is under blocking sanctions from the United States , the European Union, Great Britain and a number of other Western countries. After the restrictions were introduced, he sold his “daughter” in Kazakhstan.

Will the bank be able to enter the Chinese market?

Opening a bank branch in China requires approval from the People's Bank of China and the local Banking Regulatory Commission ( China Banking and Insurance Regulatory Commission, CBIRC), experts interviewed by RBC note.

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The conditions for obtaining a license, in particular, are the stable profitability of the “parent” bank, the absence of offenses, the presence of experience in international business, an effective policy against cashing out and money laundering, the volume of assets of at least $20 billion, lists Kira, co-head of the sanctions law and compliance practice at Pen & Paper. Vinokurova. In addition, according to her, the “home jurisdiction” of a bank wishing to enter the Chinese market must have effective banking supervision authorities and cooperate with regulators in the PRC.

“Large Russian banks that came under Western sanctions in 2022-2023 meet many of the specified requirements,” the expert concludes. However, applications to register a branch in China are not processed quickly - the period is at least six months and can be extended to nine months, says Vinokurova.

The process stretches out if the regulator requests additional information and documents, notes Yuri Fedyukin, managing partner of the legal company Enterprise Legal Solutions: “In practice, two years from the date of submission of documents is far from the limit. Again, it all depends on the type of banking license and what products and services the bank intends to sell. Banks with foreign capital are a separate category; their activities are supervised even more thoroughly by the CBIRC and the Central Bank; in addition, they need additional licenses to work with currencies foreign to China.”

Alfa Bank can open branches in China, despite Western sanctions, according to experts interviewed by RBC.

“China’s orientation towards Western sanctions and their compliance is gradually decreasing,” Vinokurova notes. She points out that on June 28, 2023, the PRC adopted a law aimed, among other things, at countering sanctions pressure from the United States and the EU .

“Foreign companies operating in China must not only comply with the laws, but also not jeopardize national security and not contradict public interests. Of course, interaction with a sanctioned person and actions aimed at circumventing sanctions violates Western sanctions regimes. However, the decision remains with China, for which its own national and economic interests are a priority,” says Vinokurova.

“The issue of sanctions is quite complicated. On the one hand, China does not support sanctions, on the other hand, we see how the Chinese banking system and payment system operators react to them,” notes Fedyukin. He cites the example of the Chinese payment system UnionPay, which ceases to cooperate with all Russian banks as they fall under sanctions.

“It is obvious that the work of structures of Russian banks subject to sanctions in China is impossible in a vacuum. That is, transactions must take place between them and Chinese banks. In China, the largest banks have compliance procedures and staffs of lawyers who assess risks, including sanctions. Unfortunately, I cannot imagine how this problem will be resolved,” the lawyer concludes.