On The Introduction Of Strategic Investors Of City Commercial Banks

From 1996 to 1998, China Everbright Bank and Bank of Shanghai introduced foreign strategic investors—Asian Development Bank and International Finance Corporation, and became pioneer of the introduction of foreign strategic investors.On December 11,2001, China formally joined WTO. According to the agreement signed with WTO, five years after WTO accession, China should fully open its banking sector, and give the same national treatment to foreign banks. In response to the fierce competition after fully opening of the banking sector, the Chinese government proposed the plan of introducing foreign banks with advanced professional knowledge and management experience as partners. In December 2003, the CBRC issued "Measures of overseas financial institutions buy the shares of Chinese-funded financial institutions"; In 2005, the CBRC Chairman Liu Ming Kang confirmed the importance of the introduction of foreign banks, and said the China Banking Regulatory Commission had been actively encouraged to attract qualified overseas strategic investors to participate in Chinese bank reform and reorganization. The boom of introducing strategic investors to commercial banks was set off.Since the year of 2004, Bank of Communications, China Construction Bank, Bank of China, ICBC and other large commercial banks have introduced foreign strategic investors and successfully IPO. Industrial Bank, Shenzhen Development Bank and Guangdong Development Bank and other joint-stock commercial banks, city commercial banks such as Bank of Beijing, Bank of Nanjing also have introduced strategic investors to achieve improving corporate governance, and competitiveness. As domestic banks introduced foreign strategic investors and successfully completed IPO, the society launched a fierce debate on the pros and cons of introducing foreign strategic investors. There are both positive and negative views on this issue, including the improvement of corporate governance, strengthening of internal management, endangering the national financial security, fire sale of equity and so on.In 2007, Bank of Chengdu launched the capital increase and shareholding expansion project. By comparison between several foreign investors, Bank of Chengdu selected Hong Leong Bank from Malaysia as a strategic investor. Hong Leong Bank bought 650 million shares at the price of 3 yuan per share, and held 20% of total shares. According the principle of same share has same price, Bank of Chengdu issued 1.35 billion shares to domestic investors,2 billion shares in total to foreign and domestic investors, and raising 60 billion yuan. Bank of Chengdu used the premium to make up loss of assets, thus solved the historical problems. After completed capital increase, in accordance with the strategic cooperation agreement signed by foreign strategic investor and Bank of Chengdu, Bank of Chengdu and Hong Leong Bank has cooperated in-depth in risk management, personal financebusiness, asset-liability management, treasury business, credit operations, information technology and other aspects. Bank of Chengdu learned from Hong Leong Bank the advanced technology, management experience and methods, and meet narrowed the gap on business philosophy and management standards, and realized the improvement of corporate governance mechanisms, truly realized the introduction of capital, talent and mechanism.Bank of Chengdu’s practice shows the introduction of good foreign strategic investors can really help to improve capital strength, optimize corporate governance, introduce advanced technology and management experience, and enhance overall competitiveness. Meanwhile, from the experience of Bank of Chengdu, we can see the problems that can easily come out during the process of introducing strategic investor and useful attempt to address these issues made by Bank of Chengdu. The author has full participated in the project of introducing foreign strategic investors at Bank of Chengdu, and based on work experience, proposes a number of measures and recommendations, which can give the current institutions who want to introduce foreign strategic investors, i.e other city commercial banks and rural Commercial banks some reference.