The Federal Reserve approved an application Wednesday that will allow a Chinese state-controlled bank to take over a U.S. bank for the first time in history.
When Industrial and Commercial Bank of China, China’s largest bank, completes its takeover of Bank of East Asia’s U.S. branch, it will gain control of 13 retail branches on American soil, another first for a state-controlled bank. The deal, originally penned in January 2011, will have ICBC pay $140 million for an 80 percent share of Bank of East Asia USA.
While the acquisition is small by banking standards, increased Chinese involvement in U.S. markets could prove beneficial to both countries. As a part of the deal, ICBC will be recognized as a bank holding company along with the China Invest Investment Corporation and China Hujin Investment, meaning they will be regulated as commercial U.S. Banks. The application’s approval comes on the heels of the May 3-4 talks in Beijing, after which officials from the U.S. treasury noted China was in the process of financial reforms to promote a more market-oriented system.
Other Chinese banks have shown plans to expand into America as well. The Bank of China, the country’s third-largest bank, operates a pair branches in New York City along with one in Los Angeles, and has been granted approval for a new branch in Chicago. The Agricultural Bank of China previously had plans for a New York City branch as well.
With the ICBC’s application approved, the company will have three months from Wednesday to complete the takeover of Bank of East Asia
