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Three banks to grow in US

By Wang Xiaotian  (China Daily)

13:27, May 11, 2012

The US Federal Reserve Board on Wednesday announced that it had approved a move that would allow three major Chinese State-owned banks to extend their footprint in the country, viewed as a major breakthrough after last week's bilateral strategic and economic dialogue.

The Fed approved an application filed a year earlier by Industrial and Commercial Bank of China Ltd, the world's largest lender by market value and the most profitable, to purchase up to 80 percent of the Bank of East Asia Ltd's US unit.

It is the first time that a Chinese bank has been allowed to buy a majority stake in a local depository institution, which signals a substantial opening of the US banking market to Chinese lenders, said analysts.

The Fed also approved an application by Bank of China Ltd, the third-largest Chinese bank by assets, to establish a branch in Chicago and an application by Agricultural Bank of China Ltd, the fourth-largest, to establish a branch in New York.

In addition, the Fed allowed ICBC, Central Huijin Investment Ltd and sovereign wealth fund China Investment Corp to become bank holding companies.

Under US regulations, a bank holding company may, directly or through subsidiaries, engage in non-banking activity determined by the Fed to be closely related to banking.

These activities could include mortgage banking, consumer and commercial finance and loan servicing, leasing, collection agency, asset management, trust company, real estate appraisal, financial and investment advisory activities and certain insurance-related activities.

A bank-holding company can also make limited investments in companies not engaged in activities closely related to banking.

"The board has concluded that consummation of the proposal would not have a significantly adverse effect on competition or on the concentration of banking resources in any relevant banking market," the Fed said in a statement on its website.

Guo Tianyong, director of the Research Center of the Chinese Banking Industry at the Central University of Finance and Economics, said the move was a response to China's opening for foreign banks and showed that Chinese lenders' performance and the competence of China's banking regulators had been fully recognized by major economies.

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