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Asia-focused British bank Standard Chartered will invest about US$123 million to buy a 19.99 percent interest in Bohai Bank, which is to be based in North China's Tianjin Municipality.
The British bank signed the Promoters Agreement witnessed by Chinese Premier Wen Jiabao and his visiting UK counterpart Tony Blair - in Beijing yesterday.
The agreement marks the lender's first investment on the Chinese mainland; and is close to the maximum limit of 20 percent a single foreign investor can hold in a domestic bank.
As Bohai Bank's sole foreign strategic investor, the lender will make use of its strong global resources and innovative product capacities to ensure the success of the new bank, said Bryan Sanderson, chairman of Standard Chartered.
"We will leverage our international banking experience to assist Bohai Bank in many areas, including product development, risk management and governance," he said.
Standard Chartered's headquarters is in London but its key operations are in Asia, where it makes more than three quarters of its profit, Africa and the Middle East.
Bohai Bank is the first national joint-stock commercial bank to be set up in China since 1996; and also the first national joint-stock bank headquartered in Tianjin.
The bank was established using a "promoter" model, whereby domestic and foreign promoters subscribe for shares in cash.
The initial capital of the bank is 5 billion yuan (US$616.5 million).
Tianjin TEDA Investment Holding Company Ltd is the largest promoter with a 25-per-cent stake.
Other promoters include China Ocean Shipping (Group) Co, Shanghai Baosteel Group Corp, State Development and Investment Corp, Tianjin Trust and Investment Co Ltd and Tianjin Shanghui Investment (Holding) Co Ltd, with stakes of 13.67 percent, 11.67 percent, 11.67 percent, 10 percent and 8 percent, respectively.
Standard Chartered has nominated senior managers for the positions of vice-chairman and deputy chief executive officer, who would also act as a director and a risk officer.
Yang Zilin, former chairman of Export-Import Bank of China, has been nominated the chairman.
Ma Teng, former head of credit card business at Industrial and Commercial Bank of China, has been nominated chief executive officer.
The establishment of Bohai Bank was approved at the end of 2003; and the Office of Bohai Bank Preparatory Leadership Group and Standard Chartered signed a framework agreement last year.
On December 30, the China Banking Regulatory Commission (CBRC) approved the proposal for establishing the bank.
As a new entity, Bohai Bank has no historical burdens like other competitors including the big-four State-owned banks, Yang said.
"This is favourable for us to build Bohai Bank into a modern commercial bank with flexible mechanisms, scientific corporate governance, sound internal control and well-regulated operations and management," he said.
The presence of Standard Chartered as a foreign strategic investor at the promotion stage also means the bank has made a relatively good start, he said.
Chinese regulators have placed great expectations on foreign expertise in ensuring the quality of new banks. Having a qualified overseas strategic investor is among the six requirements the CBRC has announced for the establishment of new banks.
According to Yang, Bohai Bank will start operations at the beginning of next year with initial focus on the Bohai Bay area, Yang said.
A year later, it will expand to the Yangtze River Delta, the Pearl River Delta and other major economic areas, he added.
(China Daily September 7, 2005)
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