The US Federal Reserve has approved China Merchants Bank’s application to open a branch in New York.

The Shenzhen-based bank will become the first Chinese lender to open a branch in the United States since the country enacted the Foreign Bank Supervision Enhancement Act in 1991.

An official statement from the US government said the branch will ‘engage in wholesale deposit-taking, lending, trade finance, and other banking services.’

China Merchants Banks is China’s sixth-biggest lender and has, in the past, operated a representative office in New York. That is very different from a full branch the application for which was submitted n March this year.

The bank, with assets valued around US$145.6 billion, engages primarily in corporate and retail banking and treasury operations throughout China and operates a branch and an investment adviser subsidiary in Hong Kong.

Meanwhile, China Merchants has agreed to buy 10% of Taizhou City Commercial Bank to expand its domestic distribution network. China Merchants will pay RMB272.1 million (US$36.7 million dollars) for these shares.

Chinese financial companies are buying into the American banking scene where prices are at a low ebb partially because of the sub-prime problem. Which puts US regulators somewhere between a rock and a hard place. The Fed must sign off on any transaction in which a foreign investor takes more than a 5% stake in a U.S. bank. And it must approve any applications to open branches in the US.

On the one hand, the government is supposed to be committed to unfettered cross-border deals as when American companies try to buy stakes in China.
On the other hand, Chinese banks operate in a very different regulatory environment.

It has been suggested this is why the U.S. has dragged its feet on letting Chinese banks set up U.S. branches.

Minsheng Bank has agreed to buy a 9.9% stake in San Francisco’s UCBH—marking the first such move by a Chinese bank on U.S. soil.
Industrial & Commercial Bank of China (ICBC) and China Merchants Bank have applied to the Federal Reserve to open stateside branches.
Citic Securities has taken about 6% of Bear Stearns for $1 billion.
CCB, China’s third-largest bank, bought Bank of America’s operations in Hong Kong and Macao last year.

China’s three biggest banks rank among the top 20 in the world by market value, with ICBC overtaking Citigroup and Bank of America as the largest in July.

This is not to say that buying into American banks is that great an idea. Pete Hahn, a fellow at City University’s Cass Business School in London said, ‘In the current environment, you would have to be extremely brave or extremely stupid to buy a U.S. bank.’
Source: BusinessWeek

China Merchants Bank, labeled the best bank in China by finance magazine Euromoney, has been given the green light from the national banking regulator to set up a financial leasing company.

The Shanghai-registered leasing company will be solely funded by the CMB, with a registered capital of RMB2 billion ($266.89 million).

The main business of the company will cover procurement of aircraft, ships and other large equipment, and financing for small and medium-sized companies. The bank is now making final preparations to open for business.

An issued statement reads: ‘The non-banking financial business of this new company will complement the bank’s traditional banking businesses.’

Other major banks including China Construction Bank, the Industrial and Commercial Bank of China, the Bank of Communications and the China Minsheng Banking have also been approved by the China Banking Regulatory Commission to set up financial leasing companies.

The Rules Governing Financial Leasing Companies that took effect this March have allowed domestic commercial banks to hold stakes in financial leasing companies.

Yang Boqin, a senior official with Shanghai Ronglian Finance Leasing Share, said, ‘In the United States, about 30% of large operating equipments, including aircraft and ships, are leased compared with only 3% in China, which indicates a huge potential market.’

Cai Esheng, deputy chairman of the CBRC, has said more qualified banks would be allowed to set up financial leasing companies based on actual needs. The illustration shows customers lining up for ATM machines at the China Merchants Bank. Somehow it seems appropriate.
Source: Window on China

China Merchants Bank needs to compete with all the foreign banks that have set up in Shenzhen. So it has added an English-language hotline for expatriates in China in a bid to attract foreign clients.

The Shenzhen-based bank launched the English service on its 95555 client hotline after a three-month trial. Foreigners can press eight to link to the English-language service.

The new inquiry option should help the bank compete against its overseas rivals.

China fully opened its banking market to foreign banks in December.

HSBC, Citibank, Standard Chartered and the Bank of East Asia have begun operations as domestically incorporated banks.

Offering an English language service is one way of the local bank fighting back.
Source: Shanghai Daily