Citi Enables Global Investors to Participate in Margin Financing and Securities Borrowing for the First Time in China

Shanghai/Hong Kong – Citibank (China) Co., Ltd. ("Citi China") announced today that its Direct Custody & Clearing (DCC) business has successfully facilitated some of the first margin financing and securities borrowing transactions in China for global investors under the Qualified Foreign Institutional Investors (QFII) scheme, making it amongst the first custodian banks to do so. Today marks the first time in QFII's history that global investors can conduct such transactions in the China A-share market, following the new QFII regulations which took effect on November 1, 2020.

"We are pleased to have implemented the first batch of margin financing and securities borrowing transactions for our QFII clients today," said Aashish Mishra, Citi's APAC Head of Direct Custody & Clearing. "This is further evidence of our ability to deliver local expertise to our global clients and demonstrates our commitment to grow with our clients as they look to access new products in China."

Margin financing and securities borrowing, together with securities lending enabled last month, significantly expand the variety of financial instruments available to QFII investors and provide new ways for them to participate in the China A-share market. Citi facilitated some of the first QFII securities lending transactions on November 2, 2020, the first trading day since the new QFII regulations. The new QFII regulations made major amendments to the previous regime, including unifying QFII and RQFII schemes, expanding permissible investment scope, as well as streamlining the application and review procedures, offering a more convenient and flexible framework for foreign investors to participate in China's capital markets.

"These new instruments could help global investors achieve more flexible and diversified investment strategies, potentially increasing the return and providing an alternative to hedge market risk," commented Vicky Tsai, Citi's China Head of Securities Services.

"We have seen a significant new wave of QFII applicants in recent months. Global investors are looking to take advantage of the new financial instruments available to them, expand their network inside China and reduce counter-party and concentration risk," said Bryan Murphy, Global Head of Intermediaries Client Coverage at Citi's Securities Services. "Citi is pleased to be able to partner with its global clients as they do so."

Citi was among the first banks to receive approval from China regulators in 2003 to act as a QFII custodian. In subsequent years, Citi obtained the Bond Settlement Agent (BSA) license and the Futures Margin Depositary Bank (FMDB) license. Recently Citi obtained the domestic fund custody license, a significant milestone enabling it to service onshore mutual funds and private funds, including the PFM ("private fund managers") funds, which is now under the permitted investment scope of QFII. Citi's full custody and settlement related licenses and capabilities in China distinguish it amongst its international rivals. Together with its Hong Kong custody, agency securities lending, and prime finance capabilities in Stock Connect and China A-share structured products, Citi is able to deliver a front-to-back China access solution to its global clients.