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ANZ Joins Banks Exiting Chinese Mainland

By Wu Yujian and Chen Na
A branch of Australia and New Zealand Bank is seen in Beijing. This bank sold its 20% share in Shanghai Rural Commercial Bank, according to a company statement released on Tuesday. Photo: Visual China
A branch of Australia and New Zealand Bank is seen in Beijing. This bank sold its 20% share in Shanghai Rural Commercial Bank, according to a company statement released on Tuesday. Photo: Visual China

(Beijing) — One of Australia's biggest banks has joined a slew of lenders keen on selling Chinese bank holdings due to international risk-control regulations imposed since the 2008 global financial meltdown.

Australia & New Zealand Banking Group Ltd. (ANZ) announced Tuesday it plans to sell its 20% stake in Shanghai Rural Commercial Bank for 9.19 billion yuan ($1.32 billion) to two buyers.

Both buyers are linked to the global shipping industry. One is fleet owner and logistics giant China COSCO Shipping Corp. Ltd., while the other is Shanghai Sino-Poland Enterprise Management Development Corp. Ltd., a subsidiary of the Chinese-Polish shipping company Chipolbrok.

Shanghai Rural's biggest stakeholder is an arm of the Shanghai city government.

In a statement, ANZ Deputy CEO Graham Hodges said the Australian bank wants to focus on serving institutional clients in China through its wholly owned branches in seven cities nationwide.

“The sale reflects our strategy to simplify our business and improve capital efficiency,” Hodges said.

The move follows last year's sales of Chinese bank stakes held by the U.S. financial giant Citigroup Inc. and the Singaporean state-owned investment bank Temasek Holdings.

In February, Citigroup sold its 20% stake in China Guangfa Bank to China Life Insurance Co. Ltd. for 19.7 billion yuan. Four months later, Temasek reduced its stake in China Construction Bank to 4.81% from 5.03%.

Also in recent years, other lenders, including Germany's Deutsche Bank, Spain's Banco Bilbao Vizcaya Argentaria and Hong Kong-based Hang Seng Bank, offloaded Chinese-mainland bank shares.

Although no two banks have sold Chinese stakes for exactly the same reasons, a common driver was that “following the global financial crisis, regulators have required all banks to hold more capital,” said Paul Edwards, general manager of ANZ’s corporate communications office.

The rules were updated in response to deficiencies in financial regulations revealed by the 2008 financial crisis. They were drafted by a body of international financial regulators known as the Basel Committee on Banking Supervision.

The committee's latest regulatory framework, called Basel III, is designed to better oversee the banking sector. Like its predecessors Basel I and Basel II, the framework has no force of law. But the world’s major economies, including the United States, China and the European Union, have been implementing Basel III to better control banks under their respective jurisdictions since 2013.

Banks covered by Basel III rules have been required to set aside more reserves to back investments deemed risky.

“This means minority investments in (foreign) banks are now less capital-efficient than they were prior to the global financial crisis,” Edwards said.

To meet Basel III requirements, therefore, some banks have decided to cash out of overseas asset investments and use that capital to supplement reserves, said Zeng Gang, director of a banking research group at the Chinese Academy of Social Sciences.

The ANZ sale of Shanghai Rural Commercial Bank is subject to regulatory approval but is expected to be completed by mid-2017.

ANZ also may be thinking about selling its 12% stake in the Bank of Tianjin, which went public on the Hong Kong Stock Exchange in March.

In November, the Australian media outlet ABC News reported ANZ planned to sell its Bank of Tianjin stake. But Edwards said that due to regulations, the stake may not be sold within 12 months of the listing.

“It is therefore too early to speculate on a future sale,” Edwards said.

Contact reporter Chen Na (nachen@caixin.com)

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