Equity Investment of Overseas Financial Institutions in Chinese Financial Institutions

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Equity Investment of Overseas Financial
Institutions in Chinese Financial Institutions

• Zhou Jialong
• Director
• China Banking Regulatory Commission
• May 23 2008
• Dallas Texas

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1. Overview

• As of the end of 2007 51 overseas financial
  investors had made investment of US 22.066
  billion in 44 Chinese financial institutions.
• 25 Chinese banks brought in 33 overseas investors
  with their investment total up to US 21.253
  billion.
• 19 Chinese non-banking financial institutions
  brought in 18 overseas investors with their
  investment total up to US 0.813 billion.

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2. Investment of overseas financial institutions
in small and medium-sized rural financial
institutions

• By the end of 2007 3 rural banks had introduced
  3 overseas investors with their investment RMB
  2.443 billion
• Shanghai Rural Commercial Bank introduced ANZ
  Bank and International Financial Corporation
  (IFC).
• Tianjin Binghai Rural Commercial Bank Corporation
  introduced IFC.
• United Rural Cooperative Bank of Hangzhou
  introduced Rabobank Nederland and IFC.
• Involvement of overseas financial institutions in
  township and village banks loan companies
• Hubei Suizhou Cengdu HSBC Rural bank Company is
  already open and another township and village
  bank in Dazhu Chongqing province invested by the
  HSBC has been approved by the CBRC and is now
  under preparation for open.
• Standard Charter has submitted its application
  for the establishment of the township and village
  banks in Linger county Mongolia province. The
  application now is under review by the CBRC.
• CitiBank is conducting a study on the feasibility
  of establishing loan companies in China.

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3.Rules and regulations on the investment of
overseas financial institutions in Chinese
financial institutions

• Rules on Administrative Licensing---
• Administrative Rules Governing the Equity
  Investment in Chinese Financial Institutions by
  Overseas Financial Institutions
• Rules on Implementation of Administrative
  Licensing Items for Domestic Commercial Banks
• Rules on Implementation of Administrative
  Licensing Items for Cooperative Financial
  Institutions
• Provisional Rules Governing Village or Township
  Banks
• Provisional Rules Governing Lending Companies
• Implementation Rules on Administrative Licensing
  Items of Non-bank Financial Institutions

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3.Rules and regulations on the investment of
overseas financial institutions in Chinese
financial institutions

• Guidelines and principles---Encourage and support
  Chinese financial institutions to bring in
  qualified strategic investors.
• State shall maintain its position as the
  controlling shareholder.
• Cooperation should be conducted on commercial
  basis in line with the principle of being
  voluntary and of mutual beneficial.
• For the Chinese side the purpose for the
  introduction of the strategic investor is to
  improve their corporate governance and management
  by bringing in advanced management and technology
  rather than the funds per se. Chinese banks
  should take into consideration of their own needs
  when introducing strategic investors.
• For the foreign investors usually it needs to be
  a large financial institution and with abundant
  experiences in banking management to be a
  qualified investor.

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4. Five Criteria

• Equity share no less than 5.
• Share holding period no less than 3 years.
• Send members to serve on the Board or in senior
  management position.
• Investment in no more than 2 banks.
• Versed in banking management and technology as
  well as with the willingness for cooperation.
• Issues concerning the chosen of the strategic
  investors and the pricing of the shares should be
  dealt with on commercial basis in line with the
  principles of being voluntary and through
  negotiation.

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• Thank You