The Industrial and Commercial Bank of China (ICBC, 中國工商銀行) signed an agreement on Friday to obtain an 80 percent stake in the US arm of the Bank of East Asia (東亞銀行), according to a person briefed on the agreement. The deal, if approved by regulators, would mean that for the first time, a state-owned Chinese bank would have a controlling stake in a US financial institution.
Although the deal had been in the works for several weeks, the final terms were struck as -Chinese President Hu Jintao (胡錦濤) wrapped up a state visit to the US focused on improving economic relations between the nations.
US Federal Reserve officials and other government authorities were briefed on the proposed acquisition and raised no objections, the person with knowledge of the deal said. Still, regulators are expected to conduct a lengthy review, delaying the deal’s completion until the end of this year.
Barbara Hagenbaugh, a spokeswoman for the Federal Reserve, said the Fed had not received an application required for such an acquisition.
Federal regulators are expected to examine the Chinese bank’s operations to ensure that its financial reporting, risk management and money-laundering controls meet US standards. The Committee on Foreign Investment in the US may also weigh in, given the involvement of the Chinese government in the acquiring bank.
Although China’s banks appeared to emerge from the global financial crisis on a strong footing, analysts in the West have raised questions for years about the true condition of many Chinese banks.
The deal, which could open the door for other Chinese banks to acquire deposit-taking institutions in the US, was formalized in Chicago, at a ceremony arranged by commerce officials from both countries. Chinese banks are aggressively seeking to expand overseas, hoping that they can support Chinese companies abroad instead of losing them to US and European financial companies.
ICBC previously had one commercial bank office in New York, but had no retail branches there. The deal is considered a cornerstone of its North American -expansion plans, giving it access to US depositors. The deal could also allow US customers to open accounts containing Chinese currency.
Under the terms of the deal, ICBC will pay about US$100 million for the 80 percent stake in the US subsidiary of the Bank of East Asia, which is based in Hong Kong and has 13 branches in New York and California. Last year, ICBC bought a 70 percent stake in the Canadian operations of the Bank of East Asia, which is now known as the Industrial and Commercial Bank of China (Canada).
Bank of China (中國銀行), another state-owned bank, is the only Chinese bank that operates retail branches in the US.
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