UK proposes tougher rules for non-EU banks
The Bank of England has set out tougher proposals for non-EU banks to try to prevent a repeat of the 2008 financial crisis.
Non-EU banks wanting to take deposits would have to set up subsidiaries in the UK and face stricter rules.
These would then be directly regulated by the UK's Prudential Regulatory Authority (PRA).
Those not taking deposits from the public would be classified as branches, and benefit from lighter touch rules.
The Bank is hoping many Chinese banks will use the branch system and that the City of London will become a major hub for trading the yuan currency outside China.
The Bank put the proposals out to public consultation on Wednesday,
Andrew Bailey, deputy governor of the PRA, told the BBC's Today programme: "We are much more comfortable if branches from overseas are conducting wholesale business, that is things like trade finance.
"We are much less comfortable if they are taking deposits from the retail market in the UK and that is born out of difficult experiences we had in the height of the crisis."
Britain had to compensate deposit holders in the UK when they lost money deposited in Iceland's banking system, which collapsed in 2008 at the height of the financial crisis. The UK government is suing Iceland to get the money back.
Bank rules on branches would still mean they would have to have an equally strict home supervisor, and prove they could, in a crisis, be wound up quickly with minimum impact on the UK financial system.
Mr Bailey said it would deter some banks from entering the UK market.
"[It] does have an impact on competition in the UK banking sector, because this impact has already happened: there has been a withdrawal of foreign banks offering retail banking services.
"Now the conclusion that we drew from that was that the basis of doing that activity on the basis of branches was not sufficiently stable and not sufficiently well understood by the public.
"We don't think that is robust enough to offset any benefit that comes from competition."