Chillin' out till it needs to be funded
Fed approvals came though for ICBC’s acquisiton of Bank of East Asia’a 80% ownership interest with 13 branches in new York and California as well as a Chicago branch for Bank of China and AgBank in New York city. Feds earlier approved a ICBC Commercial Lending branch in 2008 buit these would be offering retail deposits to US customers. The approval as WSJ underlines means the Chinese bank regulatory system more or less in tune with Basel 3 is now an acceptable format for the Federal Reserve even as the three US banks are owned 45-70% by the State in China
The Chinese Banks have long aimed for an international presence to help them in shoring up profits as they expand domestically. Local loans of upto 12% were expected to default in 2011 before the State approved a one time rollover. these loans were also not counted as Balance sheet Assets earlier. Though Chinese banks do not net Derivatives positions and report Gross exposure yet Chinese commercial loans themselves are a big play and assets of each of these banks is more than $2.2 tln, the last known size for Bank of America and JP Morgan
Patriotic and Security considerations are expected to loom large in the operations of these Chinese banks but as and when Yuan products become available, they could be a good pull for investors wanting a flavour of the new China
China Investment Corp has been a big buyer in American equities like Coke and only recently stopped buying European government bonds asit uses its $300 bln corpus to help ICBC complete the Bank of East Asia acquisition with Huijin the State’s Bank holding company.