Morgan Stanley gains coveted China access

October 31, 2006 | BY

clpstaff &clp articles

Morgan Stanley's October 2 2006 acquisition of China's Nan Tung Bank resulted in the US investment bank gaining a commercial banking licence in China,…

Morgan Stanley's October 2 2006 acquisition of China's Nan Tung Bank resulted in the US investment bank gaining a commercial banking licence in China, allowing it to apply to do business in renminbi-denominated products. Normally, an overseas bank must operate in China for at least five years and is subject to tough regulations in order to secure a commercial banking licence before being able to conduct business in local currency.

As part of its Nan Tung acquisition, Morgan Stanley gained a commercial banking licence ahead of its US banking rivals, which include Goldman Sachs, Merrill Lynch and Lehman Brothers.

The acquisition will also pave the way for Morgan Stanley to strengthen its China operations and offer a broader range of products and services, such as derivatives and foreign-exchange products, to local and overseas clients based in China.

Nan Tung Bank, based in Zhuhai, the Pearl River Delta region of Guangdong province, is classified by the China Banking Regulatory Commission as a foreign-funded bank because it was previously owned by a Macao-based subsidiary of Bank of China. The bank now offers commercial banking products including deposits, home mortgage loans and corporate loans, as well as trade financing and facilities to individual and corporate customers.

Freshfields Bruckhaus Deringer advised Morgan Stanley on the deal, while Lovells acted for Bank of China.

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