Investors’ interest in stake sales of China banks points to sector’s strength
Reuters 27 February 2009
(BEIJING) China will keep its doors open to foreign banks that dumped or cut their stakes in Chinese lenders, understanding that the financial crisis forced their hand, the country’s top banking regulator said yesterday.
At the same time, Liu Mingkang, chairman of the China Banking Regulatory Commission (CBRC), noted that some foreign banks had stayed the course despite the troubles abroad.
‘If you want to stay, we warmly welcome you, and if you want to go home because your courtyard has caught fire and you’ve got to go back, that’s okay,’ he said. ‘And if you want to come back, we warmly welcome you.’
Bank of America recently sold part of its stake in China Construction Bank, while UBS and Royal Bank of Scotland each sold their entire holdings in Bank of China.
Mr. Liu pointed to investors’ strong interest in those stake sales, and the continuing participation of banks such as HSBC and Spain’s second-largest bank BBVA, as evidence of the sector’s attractiveness.
Although China’s banks have been largely insulated from the ravages of the credit crisis, Mr. Liu said that the CBRC was asking domestic banks to increase their provisions against bad loans.
It will monitor loans flowing particularly into potential problem areas such as the real estate sector, he told Reuters.
‘We will be focused on the most difficult issues, like real estate - developers, those retail businesses, we will monitor their risk and risk changes,’ Mr. Liu said.
The CBRC will also carefully scrutinise the risks banks take on through their other businesses, such as investing on behalf of clients, he said.
‘These investments will be carefully scrutinised, because nowadays the market risk is huge,’ he added.
Mr. Liu said that he currently saw no need to change the caps that it has in place on foreign ownership of its banks.
A single foreign investor may own no more than 20 per cent of a domestic bank, and the combined stakes of overseas investors may not exceed 25 per cent.
Foreign financial institutions have long been pushing for those limits to be increased, but the recent stake sales by foreign lenders have raised some doubts about foreigners’ future participation in the sector.
‘There’s no reason for us to change that cap,’ Mr. Liu told Reuters in an interview. ‘Our teachers are becoming our students. I don’t know why we should raise the cap.
‘But there’s no reason for us to lower the cap as well, because still we can see some value in such a synergy and cooperation. So just wait and see, and we will sum up our experience (from time to time),’ Mr. Liu said in English.
The Chinese banking sector has been largely spared the brunt of the global financial crisis because it did not buy many of the complex structured products that later unravelled as the home loans backing them went bad.
Mr. Liu said in a news conference yesterday that China’s banks were in good shape to ride out the global financial crisis and that a recent surge in lending was providing a crucial boost to the domestic economy.
China’s banks made 1.6 trillion yuan (S$361.7 billion) in new loans in January, a monthly record, after strong loan growth in the last two months of 2008, as well.
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Beijing says foreign banks still welcome
Investors’ interest in stake sales of China banks points to sector’s strength
Reuters
27 February 2009
(BEIJING) China will keep its doors open to foreign banks that dumped or cut their stakes in Chinese lenders, understanding that the financial crisis forced their hand, the country’s top banking regulator said yesterday.
At the same time, Liu Mingkang, chairman of the China Banking Regulatory Commission (CBRC), noted that some foreign banks had stayed the course despite the troubles abroad.
‘If you want to stay, we warmly welcome you, and if you want to go home because your courtyard has caught fire and you’ve got to go back, that’s okay,’ he said. ‘And if you want to come back, we warmly welcome you.’
Bank of America recently sold part of its stake in China Construction Bank, while UBS and Royal Bank of Scotland each sold their entire holdings in Bank of China.
Mr. Liu pointed to investors’ strong interest in those stake sales, and the continuing participation of banks such as HSBC and Spain’s second-largest bank BBVA, as evidence of the sector’s attractiveness.
Although China’s banks have been largely insulated from the ravages of the credit crisis, Mr. Liu said that the CBRC was asking domestic banks to increase their provisions against bad loans.
It will monitor loans flowing particularly into potential problem areas such as the real estate sector, he told Reuters.
‘We will be focused on the most difficult issues, like real estate - developers, those retail businesses, we will monitor their risk and risk changes,’ Mr. Liu said.
The CBRC will also carefully scrutinise the risks banks take on through their other businesses, such as investing on behalf of clients, he said.
‘These investments will be carefully scrutinised, because nowadays the market risk is huge,’ he added.
Mr. Liu said that he currently saw no need to change the caps that it has in place on foreign ownership of its banks.
A single foreign investor may own no more than 20 per cent of a domestic bank, and the combined stakes of overseas investors may not exceed 25 per cent.
Foreign financial institutions have long been pushing for those limits to be increased, but the recent stake sales by foreign lenders have raised some doubts about foreigners’ future participation in the sector.
‘There’s no reason for us to change that cap,’ Mr. Liu told Reuters in an interview. ‘Our teachers are becoming our students. I don’t know why we should raise the cap.
‘But there’s no reason for us to lower the cap as well, because still we can see some value in such a synergy and cooperation. So just wait and see, and we will sum up our experience (from time to time),’ Mr. Liu said in English.
The Chinese banking sector has been largely spared the brunt of the global financial crisis because it did not buy many of the complex structured products that later unravelled as the home loans backing them went bad.
Mr. Liu said in a news conference yesterday that China’s banks were in good shape to ride out the global financial crisis and that a recent surge in lending was providing a crucial boost to the domestic economy.
China’s banks made 1.6 trillion yuan (S$361.7 billion) in new loans in January, a monthly record, after strong loan growth in the last two months of 2008, as well.
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