CITIGROUP’S push to set up a wholly-owned securities business in China is taking longer than planned because the bank needs more time to comply with the country’s data laws, sources familiar with the matter said.

The New York-based firm is now looking to start the China securities business around the end of next year at the earliest, the sources said, asking not to be identified because the deliberations are private. While no timetable had been set, Citigroup had internally estimated the license would be in place in mid-2023, one of the sources said.

The bank submitted a preliminary application in 2021 to establish a brokerage and futures trading operation, the same year China unveiled new laws that tightened data security, requiring firms to build new infrastructure before getting approval for licenses.

The bank has already recruited the chief executive officer, chief financial officer and chief compliance officer for the securities company as required upon submission. But some hires have been put on hold, one of the sources said, as the timing of completing the technology system is uncertain. Citigroup needs a team of more than 30 employees and stand-alone infrastructure in place before seeking on-site inspection and approval to start the securities business.

The prolonged process has come against a backdrop of property market turmoil and weak business confidence in the world’s second-biggest economy. Beijing’s trade tensions with Washington have also diminished the appetite of some global banks to expand rapidly on the mainland.

A Hong Kong-based spokesperson at Citigroup declined to comment.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

Global banks have been localising technology and focusing on separating information in China from elsewhere, with President Xi Jinping’s administration imposing more curbs on data movement across China borders since 2021. Many banks and asset managers have created onshore centres to keep their China data in the country, adding to costs and management barriers.

Citigroup has retrenched in other areas in China, including shutting down its consumer banking business and selling its retail wealth management portfolio.

Morgan Stanley shifted more than 200 technology developers out of the mainland this year and has started to build a stand-alone China system to comply with local regulations, sources familiar with the matter said earlier this year. Goldman Sachs Group has been running a separate system for its onshore operations, having accelerated its technology build-out over the past two years. UBS Group has separate servers to keep its China data onshore, while segregating overseas operations.

A late entrant into China’s securities market, Citigroup dissolved its investment-banking joint venture with Orient Securities and sought to start its own after China allowed full foreign ownership of financial services companies in the country starting in 2020. BLOOMBERG