The Asian Development Bank (ADB) said yesterday it has joined the Singapore government and a group of European banks in making an equity investment in state-owned Bank of China (
Philippines-based ADB said it made a strategic investment worth US$75 million for less than a one percent stake in the Bank of China, one of the China's largest commercial banks and a leader in foreign exchange.
ADB investment officer William Willms would not rule out further investments in China's banking sector.
"The investment offers the checks and balances of a multilateral development bank to [Bank of China's] restructuring process," he said in a statement.
"ADB will assist Bank of China in its ongoing efforts to enhance its corporate governance and control systems."
The banks said in a joint statement in Beijing: "Along with other investment agreements already signed by Royal Bank of Scotland (RBS), Temasek affiliate Asia Financial Holdings and UBS, the agreement signed between Bank of China and ADB represents a major milestone in the reform of Bank of China through the introduction of foreign strategic investors."
A consortium led by RBS agreed in August to take a 10 percent stake in Bank of China for US$3.1 billion, with the Singapore government's investment arm, Temasek, acquiring an identical stake for the same amount a few weeks later.
Swiss-based UBS followed their lead late last month, announcing it will buy a 1.6 percent share in Bank of China for US$500 million.
Under Chinese law, foreign equity holdings in domestic lenders cannot exceed 25 percent.
ADB views the development of the financial sector in Asia as a critical component of the region's economic development and is committed to supporting its member countries in this endeavor, the lender said in a statement.
The Bank of China investment represents ADB's largest equity transaction from its private sector window in China to date, it added.
"The restructuring of this leading state-owned bank will serve as a model for reforming and restructuring other financial institutions in the (China's) financial sector," said Robert Bestani, director-general of the ADB's private sector operations department.
Established in 1921, Bank of China operates more than 11,000 branches in 27 countries around the world.
Bank of China was among the "Big Four" state banks China selected in 2003 to pilot the reforms covering financial restructuring and corporate governance in preparation for intensified foreign competition when the sector is fully liberalized at the end of 2006.
China is a member of the ADB, which provided US$5.3 billion in loans and nearly US$200 million in technical assistance to the region last year.
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