OCBC Bank has won approval to set up a US$100 million (S$127.1 million) private equity fund that will make it easier for the lender to invest directly in China-incorporated firms.

The local bank announced today that it has been chosen to be part of the Shanghai Qualified Foreign Limited Partner (QFLP) pilot programme, which simplifies the conversion of foreign currencies to yuan.

With the fund, OCBC can convert up to US$100 million worth of foreign currencies into yuan, to make multiple investments into domestic Chinese companies directly. This reduces red tape by eliminating the need to seek approval for the conversion of foreign currencies into yuan for each deal.

As a result, it will shorten the time needed to inject foreign funds into the Chinese companies, from up to six months to around one or two months, said Mr Than Su Ee, the head of OCBC's private equity and special opportunities arm, Mezzanine Capital Unit.

Without QFLP status, investors would need regulatory approval for each transaction involving the exchange of foreign currencies.

Once OCBC uses up its US$100 million quota, it will have to re-apply for a new QFLP permit.

OCBC is the first Southeast Asian financial institution to set up a QFLP fund in Shanghai. Other private equity institutions that have obtained the QFLP status include Carlyle Group and Blackstone Group.