A US Federal Reserve decision to let Chinese banks acquire US lenders was challenged on Thursday by US Senator Bob Casey, who said it could open the way for Chinese government-run institutions to undercut US banks.
“I worry that these banks and their US subsidiaries will use their state support as a way to under-price US banks,” Casey, who is chairman of the Joint Economic Committee, said in a letter to Fed Chairman Ben Bernanke.
Industrial & Commercial Bank of China Ltd (ICBC, 中國工商銀行) won approval from the Fed on Wednesday to buy a US lender in the biggest opening of the US banking market to Chinese companies. The Fed allowed ICBC to operate as a bank holding company, buying a controlling stake in Hong Kong-based Bank of East Asia Ltd’s (東亞銀行) US unit.
The Fed also let Bank of China Ltd (中國銀行) open a federal branch in Chicago and permitted Agricultural Bank of China Ltd (中國農業銀行) to open a state-licensed branch in New York.
The decision marks the first time that regulators have allowed a Chinese bank to buy a majority stake in a US depository institution.
“China has a long and well-documented record of undercutting US companies and workers,” Casey said in a statement. Its “history of flouting international trade rules requires that any involvement in the US banking system needs close scrutiny.”
Casey said he intends to press Bernanke to explain the Fed’s decision when he testifies before the Joint Economic Committee next month.