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Chinese banks entry to US may set trend for more overseas expansions - Moody's


Published : Mon, 12 Nov 2007 07:30
By : Agencies
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MUMBAI (Thomson Financial) - Moody's Investors Service said the recent entry of China Minsheng Bank and China Merchants Bank into the US market indicates that overseas expansion by mainland banks may now be entering a new phase as the economic relationship and interdependency between the two countries strengthens.

China Minsheng is buying a stake into UCBH, a small local US bank, while China Merchants has won Fed approval to set up a branch in New York City.

Moody's senior analyst Richard Lung said, 'The coincidence of improved market access and strong growth potential in the bilateral banking business will no doubt attract more mainland banks as well as encourage existing participants to expand operations.'

The Chinese banks will have the opportunity to increase the value of their franchise and diversify earnings besides opening avenues for cross-border risk management products.

Moodys' feels demand for foreign currency and interest rate derivatives will rise as China moves towards capital account liberalization and yuan convertibility.

However, it added the China Minsheng/UCBH deal may not be a trendsetter because the Chinese bank is not a predominantly government-owned institution, meaning the transaction can avoid various regulatory issues.

TFN.newsdesk@thomson.com

ukn/ran

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Copyright Thomson Financial News Limited 2007. All rights reserved.

The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.

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