State-run Bank of China said on Thursday it had dropped a planned 2.3 billion yuan (US$336.6 million) investment for a 20 percent stake in French bank La Compagnie Financiere Edmond de Rothschild after a regulatory deadline passed without a deal.
Bank of China spokesman Wang Zhaowen said the bank would not extend the deadline and the plan for an investment had lapsed.
"We failed to obtain approval from relevant Chinese authorities for the deal," Wang said by telephone. "However, we will continue to seek other forms of business cooperation with Rothschild."
China has stepped up scrutiny on overseas investments by domestic financial institutions after companies such as Ping An Insurance and China Investment Corp suffered high-profile losses investing abroad.
In a notice issued in February, the China Banking Regulatory Commission, the industry watchdog, told the country's five biggest lenders, including Bank of China and Industrial & Commercial Bank of China that it would step up regulation of their overseas acquisitions and investment.
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"The government is getting cautious toward banks' overseas acquisitions, fearing that overseas assets involve unseen risks," said Jin Lin, analyst at Everbright Securities Co.
"It's a frustration for Bank of China, who has been seeking to strengthen its high-end private banking business through foreign partnerships."
Bank of China last year invested in Geneva-based asset manager Heritage Fund Management (HFM) and started operating a private bank and an asset management firm in Switzerland.
The bank also had business cooperation with the Royal Bank of Scotland before the British bank ended its strategic partnership with the Chinese lender earlier this year.