The Industrial and Commercial Bank of China has been granted a branch license to operate in the UK on Tuesday, said the Prudential Regulatory Authority, the British financial services regulator which is a part of the Bank of England.

"We can confirm that ICBC has been authorized to operate in the UK as a wholesale-only branch," a Bank of England spokesperson said.

Previous to the announcement, ICBC was operating in the UK as a subsidiary, which has far more strict capital requirements than a branch. With its new branch license, ICBC can now have far greater lending and financing capacity.

The issue of Chinese banks wanting to set up branches first emerged in 2012 when a group of Chinese banks expressed frustration over regulatory matters in a letter sent by the Association of Foreign Banks to Britain's Treasury.

Their main complaint concerned the British regulator's refusal to let them open branches, which would have had lending and financing capacity proportional to the parent company's balance sheet.

Subsidiaries, in contrast, are subject to the strict capital requirements that apply to Britain's local banks, hence lending and financing capacity is proportional to the balance sheet of the subsidiary itself.

The complaints raised by Chinese banks have caught the attention of the British government, and in particular, the City of London has been helping Chinese banks to voice their concerns.

Last year, the Bank of England announced foreign banks would be allowed to apply for a branch license, although only for wholesale businesses. Retail businesses still needed to be conducted under subsidiary license, to protect individual depositors.

"The pressure came from the Chinese banks, and that's perfectly proper. Without the pressure from the Chinese banks, it may not get looked at," Mark Boleat, the chairman of the policy and resources committee of the City of London Corporation, told China Daily in a previous interview.

Before ICBC's branch license, Bank of China was the only Chinese bank to have a branch license in London, as its license was given before the regulations tightened up.

Currently, Bank of China, ICBC and China Construction Bank all have theirEuropean headquarters in Luxembourg, where they all operate as branches. The vibrant activities Chinese banks were generating in Luxembourg partly contributed to pressure on the British government to allow Chinese banks to open branches.

Michelle Chen, a partner at the London-headquartered law firm Squire Sanders, said the announcement shows that the UK government is opening its door to Chinese banks to expand in the London financial center.

"The significance does not only concern ICBC but I believe more Chinese banks will also be granted branch licenses in the UK over time," said Chen.

She said the granting of branch license to ICBC and potentially other Chinese banks in the future reflect also the financing demand from Chinese companies as they expand internationally. "As branches, Chinese banks would be in a better position to serve the financing needsof Chinese companies that expand overseas."

Chen said that another significance of ICBC now having branch license is that Chinese banks are increasingly learning how to operate in a global environment, satisfying UK laws and regulations whilst providing a diverse range of products to customers.

She said the granting of branch license to ICBC and potentially other banks in the future supports the process of yuan globalization in London, following on from the appointment of China Construction Bank as London's yuan clearing bank earlier this year.