Standard Chartered, DBS among banks in China forex ban - sources

* Last week China suspended 3 foreign banks from FX business

* Standard Chartered (HKSE: 2888.HK - news) , Deutsche Bank (Other OTC: DBAGF - news) , DBS (SES: 2N8B.SI - news) hit by ban -sources

* The ban extends until the end of March for some banks

* StanChart (HKSE: 2888-OL.HK - news) has asked China to shorten suspension -source (Adds DBS)

By Engen Tham and Saeed Azhar

SHANGHAI/SINGAPORE, Jan 7 (Reuters) - Standard Chartered and DBS Group Holdings Ltd are among three lenders that China's central bank last week suspended from conducting some foreign exchange business, three sources with direct knowledge told Reuters.

Reuters reported on Dec. 30 that China's central bank had suspended Deutsche Bank and two other lenders from conducting some of their foreign exchange business until the end of March, China's latest bid to stem capital fleeing the country in the face of a weakening yuan.

The notices sent to banks did not give a reason for the suspension, but the sources for the Dec. 30 story said the banks might have been targeted due to the large scale of their cross-border forex businesses.

A spokesman for Standard Chartered declined to comment. When contacted by Reuters last week, Deutsche Bank declined to comment. A spokeswoman for DBS declined to comment. China's central bank did not respond to requests for comment.

Chinese authorities are starting to police the nation's foreign exchange market in a way currency traders have rarely seen before, levying penalty payments for aggressive trading and prompting some banks to turn down business.

It (Other OTC: ITGL - news) is not clear how long the suspension for DBS Bank (SES: MU7.SI - news) will last, but Standard Chartered is facing a ban until the end of March, the sources said.

One of the sources for the involvement of Standard Chartered, which is in the middle of a global restructuring, said the bank had asked the People's Bank of China (HKSE: 3988-OL.HK - news) to shorten the suspension, while a second source said the suspension related only to forex business conducted with overseas banks.

Standard Chartered made $720 million from forex trading globally in the first half of 2015, according to its half-year financial statement, equivalent to 8.5 percent of the lender's total operating income. (Additional reporting by Lawrence White in Hong Kong; Editing by Lisa Jucca and Mark Potter)