BEIJING (AFP) – Stealing a march on its rivals, US investment bank Morgan Stanley has said it has gained access to the key Chinese market by buying a small local lender.
The acquisition of Nan Tung Bank, based in the south Chinese city of Zhuhai, seemed to open the door to the potentially lucrative business of providing products denominated in the local yuan currency to corporate customers.
“We are pleased to be the first among our peers to establish an onshore commercial banking platform in China,” Morgan Stanley CEO John Mack said in a statement.
Foreign banks would normally have to operate for at least five years in China, clear tough regulatory hurdles and obtain a commercial banking license before being able to apply to conduct business in the yuan.
However, Morgan Stanley would clear those hurdles by inheriting a commercial banking license after its acquisition of Nan Tung Bank, one of the few Chinese banks open to foreign ownership, the Financial Times said earlier in the day.
Nan Tung Bank was previously owned by Nam Tung (Macao) Investment Limited, a subsidiary of Bank of China, one of the nation’s top four state-owned commercial lenders.
Founded in 1985, Nan Tung was the first foreign-funded bank incorporated and headquartered in China, Morgan Stanley said in a statement.
Morgan Stanley did not immediately disclose the price of the transaction, but said it had been given the green light by the China Banking Regulatory Commission, the industry watchdog.
“We are pleased to have received regulatory approval for this ground-breaking transaction,” said Wei Christianson, Morgan Stanley’s China CEO.
“Nan Tung Bank is a good strategic fit for our China business. This platform will allow us to provide a wider array of new product capabilities that are currently offered only by commercial banks with a presence within China.”
Operating Nan Tung Bank as a wholly owned subsidiary, Morgan Stanley said it would offer a comprehensive set of commercial banking products and services.
These include deposits, home mortgage loans, corporate loans, foreign currency exchange and remittances, trade finance and credit facilities to individuals as well as corporate customers, the investment bank said.
“By leveraging Morgan Stanley’s global strength, industry expertise and multi-product capabilities, we look forward to growing Nan Tung Bank’s business further,” said Hans Schuettler, CEO of Morgan Stanley Asia.
The announcement of the deal comes after growing complaints from foreign banks that business remains difficult in China, five years after its entry into the World Trade Organization.
Major restrictions for foreign banks in China include time-consuming license application procedures, different capital requirement for branch operations, foreign debt quotas and limited equity participation in local banks.
In what appears to be efforts to ensure foreigners do not become overly dominant in China, regulators have suspended approvals for new domestic and foreign-invested security brokerages.