China's authorities have relaxed licensing rules for foreign-owned banks, according to a local media report - a sign that regulators are giving outsiders more breathing room in a sector that is dominated by domestic lenders.

The China Banking Regulatory Commission has introduced new measures for investment banking institutions with the aim of opening up the nation's financial services industry and allowing more native firms to do business overseas, according to the South China Morning Post.

The watchdog has reportedly said that wholly-owned foreign bank operations, joint ventures and their branches can co-operate with their parents' groups overseas to help Chinese companies expand globally through overseas bond sales, initial public offerings, mergers and acquisitions, and other financing activities. They can also invest in some domestic financial institutions.

The CBRC's decision marks the first time Chinese officials have given regulatory support to foreign banks operating on the mainland in a bid to generate profit from their overseas activities.

Without permission, foreign banks can now underwrite treasury bonds and offer custodial and financial advisory services. Previously, they had to report to CBRC in advance of doing such business.

The new rules will streamline business operations because banks will now be able to use a post-reporting system to file regulatory reports up to five days after transactions are completed.

JP Morgan's China unit reportedly said that it welcomed the new rules, adding that they would “strengthen communications with the regulator” and have a “long-lasting impact on the bank's business”.

* Editor's note. Since this was published, the CBRC has issued a statement on its website which says: "The Notice [i.e. the recently issued Notice on Certain Businesses Conducted by Foreign Banks] clarifies that foreign banks can conduct internal business collaboration with parent banks so as to provide comprehensive financial service for going-global enterprises conducting following activities, such as issuing bonds in overseas markets, going public, merger and acquisition, financing, etc., giving full play to the strength of foreign banks in providing globally comprehensive service. In line with the principle of equal treatment of domestic and foreign banks, foreign banks can invest in domestic banking institutions. Meanwhile, according to the State Council's requirement of streamlining administration and delegating power, the Notice makes it clear that a post-reporting system would be carried out, which is to say, foreign banks can conduct treasury bond underwriting businesses, financial consulting businesses and a majority of custodian businesses without the prior approval of the CBRC. The notice requires that foreign banks should strengthen compliance and risk management in the above-mentioned business.

"By the end of 2016, foreign banks have already set up 39 legal entities with 315 branches, 121 branches directly under parent banks and 166 representative offices in China. The number of institutions steadily increases with 1031 operating outlets in 70 cities. Foreign banks in China generally maintain sound operation, constantly strengthen risk management while serving the real economy, and maintain good capital quality. In the meantime, foreign banks keep expanding investment and resource input in Chinese financial institutions, thereby reflecting their confidence and long-term commitment in Chinese markets."