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Wan LixinOpinion deputy editor of Shanghai Daily
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Lockup period increase proposed
By Zhang Fengming |
April 1, 2009, Wednesday
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Online Edition
Online Edition
CHINA is reportedly planning to increase the lockup period for foreign investment in the country's commercial banks.
The increased lockup period, from three years to five, would apply to future investments, the Shanghai Securities News said today, citing Liu Mingkang, head of the China Banking Regulatory Commission.
Liu said that China would not increase the investment cap for foreign investors in Chinese banks. A single foreign investment is capped at 20 percent while the limit for combined investment is set at 25 percent.
The banking regulator was not available for comment.
Overseas partners of Chinese banks have trimmed holdings to raise capital as their balance sheets were depleted by billions of dollars in write-downs on bad assets amid the worst financial crisis since the 1930s.
The Bank of America sold part of its stake in the China Construction Bank while the Royal Bank of Scotland sold all of its stakes in the Bank of China earlier this year.
"Under normal circumstances, foreign banks would not willingly part with their stakes, valued at multiples of their initial value and intended as a means of cementing long-term relationships in a promising financial market," Moody's said in a report today.
"The disposals will not have a meaningful impact on the Chinese banks' financial strengths, or their ratings, because the divestments will not result in any changes to the banks' management or operations," said Wah Leo Wah, a Moody's senior Analyst.
"We believe that these strategic partnerships have provided, and will continue to provide, long-term benefits to both foreign and Chinese banks."
A number of foreign banks acquired stakes in Chinese counterparts shortly before the Chinese institutions' initial public offerings overseas in 2004 and 2005.
The increased lockup period, from three years to five, would apply to future investments, the Shanghai Securities News said today, citing Liu Mingkang, head of the China Banking Regulatory Commission.
Liu said that China would not increase the investment cap for foreign investors in Chinese banks. A single foreign investment is capped at 20 percent while the limit for combined investment is set at 25 percent.
The banking regulator was not available for comment.
Overseas partners of Chinese banks have trimmed holdings to raise capital as their balance sheets were depleted by billions of dollars in write-downs on bad assets amid the worst financial crisis since the 1930s.
The Bank of America sold part of its stake in the China Construction Bank while the Royal Bank of Scotland sold all of its stakes in the Bank of China earlier this year.
"Under normal circumstances, foreign banks would not willingly part with their stakes, valued at multiples of their initial value and intended as a means of cementing long-term relationships in a promising financial market," Moody's said in a report today.
"The disposals will not have a meaningful impact on the Chinese banks' financial strengths, or their ratings, because the divestments will not result in any changes to the banks' management or operations," said Wah Leo Wah, a Moody's senior Analyst.
"We believe that these strategic partnerships have provided, and will continue to provide, long-term benefits to both foreign and Chinese banks."
A number of foreign banks acquired stakes in Chinese counterparts shortly before the Chinese institutions' initial public offerings overseas in 2004 and 2005.
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