The Industrial and Commercial Bank of China has received US government approval to take over an American bank.
This historic event marks the first time in history a Chinese bank has taken over a U.S. retail bank and could presage similar M&As in the future by Chinese banks, led by the state-owned “Big Four” banks.
The Federal Reserve approved an application from ICBC to buy a majority stake in the U.S. subsidiary of Bank of East Asia whose headquarters is based in Hong Kong. ICBC will buy up to 80% of Bank of East Asia USA at a cost of US$140 million.
The Fed said the takeover may not occur before May 15, however.
"This unprecedented acquisition of a controlling stake in a U.S. commercial bank by a mainland bank is strategically significant," said ICBC chairman Jiang Jianqing.
Bank of East Asia USA operates 13 branches. The transaction also makes ICBC the first Chinese state-controlled bank to acquire retail bank branches in the United States.
ICBC, also the largest bank in the world with assets of US$2.5 trillion, has been the most aggressive of the "Big Four” in foreign expansion. It operates subsidiary banks in Asian countries and branches in a number of countries including Germany, Japan and Singapore.
As part of the deal, ICBC and China's sovereign wealth fund, the China Investment Corporation (CIC) and Central Huijin Investment will be recognized as bank holding companies, and will be regulated as commercial U.S. banks.
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