WSJ headlines and questions for January 24 2011

WSJ headlines and questions for January 24 2011 - U.S are...

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WSJ headlines and questions January 24, 2011. WSJ Headline January 22-23. Chinese Bank Makes a Bold U.S. Bid China’s biggest bank has signed an agreement that would make it the first Beijing- controlled financial institution to own retail bank branches in the U.S. Industrial & Commercial Bank of China (ICBC), which was number 13 among the world’s largest banks on our rankings last week, agreed to buy a majority stake in Bank of East Asia’s U.S. subsidiary for about $100 million. ICBC is 70% government owned, whereas Bank of East Asia is privately owned. The deal involves 13 branches in NY and CA. Possible motives in the article include a desire to better support Chinese companies overseas (“follow your customer”), and a desire by the Chinese government to invest foreign exchange overseas. The deal would have to approved by U.S. regulators, including the Committee on Foreign Investment in the United States. U.S. regulators want to be sure that foreign banks in the
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Unformatted text preview: U.S. are adequately supervised in their home country. Questions: 1. Why is ICBC really doing this? Is it efficient to follow its customers, or it the hubris hypothesis – that managers want to build a bigger, more expansive empire? 2. Is it likely that the U.S. offices will be efficiently run, given the research that shows that a) foreign-owned banks in developed nations are usually less efficient than domestically-owned banks, and b) state-owned banks are generally the least efficient? 3. Should U.S. regulators approve the deal? Is there a prudential concern about the supervision in China? 4. If this deal is approved, is it just the tip of the iceberg? Will many more Chinese acquisitions of U.S. banking organizations follow? 5. Should we be worried about the supervision of these banks or about the availability of credit to U.S. companies, given the research that shows that foreign-owned banks make less domestic loans?...
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