MUFG Receives Approval For Chinese Central Bank Market Operations

MUFG
FILE PHOTO: A man walks past Mitsubishi UFJ Financial Group and MUFG Bank sign at their headquarters in Tokyo, Japan, April 3, 2018. (Photo: REUTERS/Toru Hanai/File Photo)

MUFG Bank was recently granted by the Chinese Central Bank approval for market operations in the country's massive financial industry. This marks a milestone for MUFG Bank as being the first Japanese institution and fourth non-Chinese lender to ever receive with that privilege.

The core unit of the Mitsubishi UFJ Financial Group, MUFG, is hoping that the development will finally provide it with a much better insight into the Asian superpower's monetary goals, regulations, and policies. Among the bank's planned operations will involve the purchase and sale of government securities through the central bank. This is considered as a primary tool when it comes to adjusting the amount of money within China's banking system.

The approval of access came in a time when MUFG is considering scaling down its overseas market divisions. Earlier this week, MUFG Bank said that it is considering scaling down it's bond and equity sales and trading operations in New York and London. The bank said that it is part of the bank's broader restructuring of its global division.

In terms of assets, MUFG stands as Japan's biggest bank. Aside from its global division, the bank is also looking to overhaul its Japanese equity business both at home and overseas.

The People's Bank of China notified the local arm of MUFG Bank about the decision. Arrangements over the final agreements and system updates with a specific aim of taking part within its first open-market operations expected to kick-off within this month.

China's financial policies remain steady for the better part of the decade. Since October 2015, China has kept the county's benchmark deposit rate at a steady pace. In a statement acquired by Nikkei Asian Review, a Chinese banking source said, "With interest rates gradually liberalizing, the deposit rate is becoming more symbolic."

The Chinese central bank's preferred operation of choice continues to focus on the repurchases of reserves. In 2018, more than 10 trillion Yuan was pumped back into the Chinese market. Open market operations and reserve ratios have become the People's Bank of China's primary tool in recent years.

As of this writing, less than 50 banks were given approval to participate in China's open market operations. Among these growing list of banks include Citigroup and HSBC. The MUFB Bank has been seeking access to the Chinese financial industry since 2016.

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