Global sub-custodians Citibank, HSBC and Standard Chartered, all of which have been granted permission by the People's Bank of China to act as custodians for China's emerging qualified foreign institutional investor QFII scheme, are lobbying hard for changes to the rules in order to mitigate risk.
Bankers want to create a matching and error-rectification process. Currently, custodians face principal risk, explains Richard Ernesti, regional head of global securities services at Citibank. Say a QFII licence holder orders a trade - say to buy a particular A share - and sends the information to the local brokerdealer. The brokerdealer confirms that the custodian has the cash to buy, and executes over the...
