BEIJING - UBS AG said Wednesday that it has received approval from China's banking regulator to convert its Beijing branch into a locally incorporated, wholly foreign-owned bank.

The new bank will be called UBS (China) Limited and is expected to go into operation by the third quarter of this year, UBS said.

Possessing a locally incorporated bank is a precondition for UBS to start its yuan-related business and aid in its commodity, currency and fixed-income businesses, the company said.

The establishment of the locally incorporated bank will also enable UBS to increase its onshore capital and allow the bank to start offering additional products and services, such as short- and medium-term notes for corporate clients and structured deposits for wealth management clients, the company said.