ICBC takes controlling stake in US bank
May 12, 2012 | BY
clpstaff &clp articles &Wednesday signaled a breakthrough for Chinese financial institutions as the Industrial and Commercial Bank of China became the first mainland bank to acquire a controlling stake in a US counterpart
The US Federal Reserve released the Order allowing ICBC to buy an 80% stake in the Bank of East Asia alongside two other approvals for branch offices in New York and Chicago of the Agricultural Bank of China (ABC) and the Bank of China (BOC), respectively.
“A signal has been sent that the US banking market is continuing to open up for branching and acquisitions and other equity investments by mainland Chinese banks in particular and international banks in general,” says White & Case Partner Ernie Patrikis, who represented ICBC and the Bank of China.
The move also shows a change in attitude towards China's state-run enterprises. While industry experts and media have consistently questioned the accuracy of Chinese accounting methods, the Order stated: “There is no evidence that Chinese accounting methods or practices at large Chinese banks, such as ICBC, are unreliable.”
The approval comes a week after the fourth US-China Strategic and Economic Dialogue in Beijing. The Dialogue concluded that trade between the two nations needed to be further opened up, and this latest move shows that commitment.
In 2009, Minsheng Banking Corporation was blocked by the US government from acquiring United Commercial Bank. Allowing ICBC a dramatic shift in attitudes from the US in less than three years.
It is hoped the approval is the first of many, as more Chinese banks will contend for shares in their US counterparts. Alongside the controlling share, the branch offices for BOC and ABC is a good sign for China's banks who wish to expand their presence in the US.
By David Tring
More analysis of this deal will follow on www.chinalawandpractice.com.
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