The Bankwatch

Tracking the consumer evolution of financial services

BofA apparently pressured by China

Fascinating high stakes pressure being exerted between Chinese government and Banks.

BofA was ready to exercise its right to sell a part of its stake in the Chinese bank CCB but the Chinese government stepped in and suggested such a move would be detrimental to future BofA activities in China.

BofA shelves $3bn plan to cut CCB stake | http://www.ft.com

The share sale could have triggered a fall in CCB’s share price just as Beijing is trying to garner support for its largest banks and arrest a stock market slide.

Foreign financial institutions, including Goldman Sachs, Dresdner Bank, Temasek and Royal Bank of Scotland, hold shares in China’s leading banks worth billions of dollars and analysts say they could be tempted to sell down stakes to raise capital when their three-year lock-in periods start to expire from next month.

“Bank of America cancelling those trades has made the other foreigners realise they don’t exit at their discretion; they exit at the discretion of the Chinese government,” said one Asian dealmaker who asked not to be identified.

The Chinese government cannot prevent trading of Hong Kong-listed shares, but deal­makers said it was likely that BofA was warned of repercussions to its future business on the mainland if it carried out the sale.

UBS declined to comment.

Written by Colin Henderson

December 18, 2008 at 23:53

Posted in Uncategorized

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