Deal finally struck on Bohai Bank
By Chen Hua (China Daily)
Updated: 2005-08-19 08:52

All shareholders of Bohai Bank have reached a final agreement on the transaction documents for setting up Bohai Bank, Qian Jing, the head of China Corporate Affairs of Standard Chartered, a prominent British Bank, told China Daily yesterday.

The agreement means the last hurdle has been cleared, after disputes among the founders delayed the bank's establishment for several months.

Bohai Bank will become the first national commercial bank permitted to be established in China in eight years.

Standard Chartered will be the sole foreign strategic investor, and the second largest shareholder by taking 19.99 per cent interest in the share capital of Bohai Bank.

That is close to the maximum limit of 20 per cent for the stake a single foreign investor can hold in a domestic bank.

Also, the bank is the first case in which a foreign strategic investor acts as the initiator of a national commercial bank.

Standard Chartered's Qian did not reveal further details, but said more information would be given in the future if appropriate.

The biggest shareholder of the new bank will be Tianjin TEDA Holding, a large State-owned holding company, with more than 20 per cent of the shares.

Another investor is a Tianjin-based private enterprise.

Meanwhile, market sources said Yang Zilin, former board chairman of Export-Import Bank of China, will act as the board chairman of Bohai Bank.

And Ma Teng, a high-ranking official in Industrial and Commercial Bank of China, will become president of the new bank.

In fact, many international banks and other financial institutions have been keenly searching a proprietary entry point into the domestic market to acquire market shares before the full opening up of China's banking industry by the end of 2006.

In March this year, ING Group spent 1.78 billion yuan (US$215 million) to acquire a 19.9 per cent stake in Bank of Beijing.

The International Finance Corporation (IFC) also took a 5 per cent stake in the Beijing-based lender.

The China Construction Bank sold a 9 per cent stake worth US$3 billion in June to the Bank of America, making the US bank the largest single foreign investor in China's banking sector.

IFC had also invested in many small and medium-sized banks in China such as Bank of Shanghai, Nanjing City Commercial Bank, Xi'an City Commercial Bank, Industrial Bank and China Minsheng Banking Corp Ltd.

Compared with acquiring a stake in an existing bank, offering capital to establish a new one has its advantages, said Chen Daofu, a senior researcher at the Development Research Centre of the State Council.

It costs more to purchase a certain number of shares from an existing bank because the buyer always has to shoulder part of the bank's debts or bad assets, he said.

Moreover, it would be more efficient for the strategic investor to apply their international expertise in the market and influence the management of the new institution, he said.

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