ICBC's Agreement to Acquire a Controlling Stake in a US Bank Is a Major Development for the US and Chinese Banking Markets

February 2011
John M. Reiss, Ernest (Ernie) T. Patrikis, Francis Zou, Duane D. Wall, Glen R. Cuccinello

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In a groundbreaking transaction, Industrial and Commercial Bank of China Limited, based in Beijing and the world's largest bank by market capitalization and profitability (ICBC), entered into an agreement with The Bank of East Asia, Limited, a major Hong Kong bank (BEA), to purchase an 80 percent common equity stake in BEA's subsidiary bank based in New York, The Bank of East Asia (U.S.A.) National Association (BEA-USA). The agreement positions ICBC to become the first mainland Chinese bank to acquire a controlling stake in a US bank.

Although the agreement, which was announced by the parties on 23 January 2011, involves a relatively small dollar amount, it evidences the global business reach of the large mainland Chinese banks, which have market capitalizations sufficient to make them major players in international mergers and acquisitions markets. If approved by US regulators, the deal would signal the opening of the US banking market to acquisitions and other equity investments by mainland Chinese banks.

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