Three small- and medium-sized Hong Kong banks have got permission from the Shenzhen government to set up branches in the city next year with the implementation of CEPA, said a government official.

"Shenzhen is expected to become the first mainland city to host Hong Kong financial institutions under the new market access standard of CEPA," said Vice-Mayor Chen Yingchun.

Shenzhen has approved the applications of three Hong Kong banks and is in close contact with a fourth, said Chen.

The three applications have been submitted to the China Banking Regulatory Commission for final approval, he added. The Hong Kong banks are expected to officially launch branches in the city when CEPA comes into effect on January 1 next year.

Although Chen declined to disclose the names of the banks, sources close to the Shenzhen branch of People's Bank of China - the central bank - said the three Hong Kong banks are Wing Lung Bank, Dah Sing Bank and Shanghai Commercial bank.

The successful signing of the free-trade pact between Hong Kong and mainland in late June has increased business opportunities for small- and medium-sized Hong Kong banks. It lowers the asset requirement for the banks to set up branches on the mainland from US$20 billion to US$6 billion.

According to Chen, about 10 Hong Kong banks could meet the new asset criteria. Currently, overseas banks, including Hong Kong banks, have established 25 branches with total assets of about US$8 billion in Shenzhen.

Earlier CITIC Ka Wah Bank, a Hong Kong subsidiary of Beijing-based CITIC Group, also said it could set up a branch in the Pearl River Delta region.

A recent survey by the city's foreign-funded enterprises association showed that 44 per cent of Shenzhen companies hoped that the financial services from Hong Kong are first introduced in the local market after the implementation of CEPA, followed by consultancy, insurance and accounting services.

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