US Allows China Merchant Bank to Open NYC Branch

The U.S. Federal Reserve on Thursday approved an application by China Merchants Bank to open a branch in New York.

The bank, based in the southern export boomtown of Shenzhen, has total assets of about $145.6 billion and is the sixth-largest bank in China. It is indirectly controlled by the government through other companies.

The approval marked the second in as many months for a foreign bank seeking to open a branch in the United States. In October, the Fed approved an application by ICICI Bank, the second-largest bank in India with $91.5 billion, to open a New York branch.

China Merchants Bank's planned New York branch would engage in wholesale deposit-taking, lending, trade finance, and other banking services, the Fed said in a statement.

Chinese government and private sector officials have repeatedly pointed out that while a dozen or so U.S. banks operate in China, there is limited involvement of Chinese banks in the United States.

The U.S. approval also comes after a recent trip to the Asian country by a private U.S. trade group, which said that China may soon announce moves toward liberalizing rules for foreign credit card issuers seeking to expand their businesses.

The China Banking Regulatory Commission also may issue a report early next year on whether limits on foreign ownership of domestic Chinese banks should be lifted, according to the Financial Services Forum.

The forum, an industry group made up of chief executives of 20 of the world's largest financial institutions, welcomed the Fed action. The approval "resolves an issue frequently cited by Chinese officials as rationale for resisting greater access for U.S. banks and other financial services firms to the Chinese market," a forum spokesman said.

The Fed said the China Banking Regulatory Commission has enhanced its supervision programs and developed new procedures aimed at creating a framework for the consolidated supervision of banks in China.

China Merchants Bank's main business is corporate and retail banking and treasury operations throughout China, the Fed said. It also operates a branch and an investment adviser unit in Hong Kong.

The bank said in August it does not hold any assets that exposed it to the U.S. subprime home mortgage lending crisis.

China Ocean Shipping (Group) Co holds a 6.4 percent stake in the bank and China Shipping (Group) Co owns 5.4 percent, the Fed said. Both of those companies are owned by the Chinese government.

The Fed's review involved a wide range of issues, including auditing requirements, capital adequacy, regular examinations, disclosure issues and anti money laundering.