* Would allow separate digital platforms including by foreigners -sources
* Only four online-only banking licences issued since 2014
* Foreigners would be able to partner local tech firms -source
By Sumeet Chatterjee and Cheng Leng
HONG KONG/BEIJING, Jan 14 (Reuters) - China is working to finalise its first rules to cover online-only banking operations in a push to minimise risk in the financial sector and attract players including foreign lenders, three people with direct knowledge of the matter said.
The guidelines could also bolster foreigners with existing China operations such as Citigroup Inc, HSBC Holdings PLC and Standard Chartered PLC by allowing them to set up separate digital banking platforms, two of them said.
The framing of rules come as companies' use of data as well as digital and artificial intelligence technologies have transformed China's financial services landscape, from processing payments to selling investment products.
But foreigners have struggled to make money in mainland retail banking, with many yet to break even despite years of onshore presence as they compete with the vast physical networks of domestic rivals.
About a dozen groups including foreigners are in talks with Chinese regulators over the new rules and have shown interest in launching digital banking operations, said one person who has been involved in such discussions with the banking watchdog.
The rules would allow them to partner tech firms for independent digital banking platforms, the person said.
Banks are expected to be allowed to own majority stakes in online-only banking ventures, the people said, as the government pushes ahead with its strategy of easing access for foreigners to China's vast financial markets.
The framework, which will cover the existing online banking units of Alibaba Group Holding Ltd and Tencent Holdings Ltd among others, will form China's first comprehensive move to standardise oversight of the fast-growing digital banking sector.
Other Asian economies including Hong Kong and Singapore are also ushering in digital-only banks.
China has licensed four online-only banks since 2014 including Tencent-backed WeBank, Alibaba offshoot MYbank, and AiBank, backed by search engine operator Baidu Inc and China Citic Bank Corp Ltd.
The People's Bank of China and the China Banking and Insurance Regulatory Commission did not respond to Reuters' faxed requests for comment. The people declined to be identified as the regulatory plans are confidential.
A spokesman for Citi said the bank would review the rules when they are published, and that its own China consumer banking business had already been digitised.
HSBC declined to comment on the rules but said it would welcome any move that continued to open the financial markets in mainland China, and would always look for new opportunities to expand there.
StanChart, AiBank, MYbank and WeBank declined to comment.
In August, the central bank announced it was developing a three-year plan for the financial technology sector. It has yet to publish plans or give a timetable for doing so.
So far the online sector has made little inroad into day-to-day banking, with assets of the four online banks standing at $56 billion at the end of 2018, latest official data showed, accounting for 0.15% of China's total banking assets.
Reporting by Sumeet Chatterjee in Hong Kong and Cheng Leng in Beijing; Editing by Jennifer Hughes and Christopher Cushing