Nepal Rastra Bank (NRB) has signed a memorandum of understanding (MoU) with China Banking Regulatory Commission (CBRC), enabling the regulators to exchange supervisory information, which would facilitate opening of bank branches in each other’s country.

NRB Governor Chiranjibi Nepal and CBRC Chairman SHANG Fulin signed the MoU in Beijing on Monday in the presence of Prime Minister KP Sharma Oli and his Chinese counterpart Li Keqiang.

“Although, Nepal has opened itself for foreign banks since 2010, this agreement will make the branch opening further easier for Chinese banks,” said NRB Spokesperson Trilochan Pangeni. “It will boost confidence of banks willing to open their branches in Nepal as the MoU enables the regulators to exchange supervisory information.”

During their meeting, Li told Oli that China would encourage eligible Chinese banks to set up branch offices in Nepal, offering convenience and support for the country, according to the Chinese government’s website.

Banking experts have welcomed the development,  stating such an agreement is necessary for cross-border banking transaction. Although Chinese banks are yet to enter Nepal, increasing business activities between the two countries suggests high chances of Chinese banks opening their branches in Nepal.

“In the past, a few Chinese banks had expressed interest in opening their branches in Nepal. And with this MoU, they will definitely enter Nepal in near future,” said Maha Prasad Adhikari, former deputy governor of NRB.

After this agreement, regulators of both the countries can seek information about activities of their bank’s branches operating in other country.

Besides, the regulators can share information about clients, helping them curb fraudulent activities. “With the implementation of the MoU, the regulators can share information as well as conduct oversight inspection if there is cross-border presence of banks,” said Adhikari. “Also, sharing the information will help the regulators solve different regulatory problems.”

The MoU will also promote greater cooperation and sharing of supervisory information between the two regulatory authorities, read a statement issued by the governor’s office.

“This agreement will help in capacity building of the regulators through exchange of information and technology and exchange of staff members for training and development,” said Pangeni.

China is the second country with whom NRB has signed an MoU regarding the exchange of supervisory information. NRB had signed a similar MoU with Reserve Bank of India in September and such agreements with regulators of Pakistan and Bangladesh are in the pipeline.

With Nepal-China trade growing, the two countries have prioritised strengthening financial cooperation. In December 2014, the central banks of China and Nepal had signed a currency swap deal enabling the settlement of both cross-border and ordinary trade. The two sides had also signed a MoU on anti-money laundering and anti-terrorism cooperation.