Morgan Stanley obtains China banking license

Morgan Stanley obtains China banking license

Oct. 2, 2006 (China Knowledge) – Days after launching the first U.S.-registered fund to invest in China A-shares, Morgan Stanley has made a move to acquire a coveted Chinese commercial banking license.

The world’s largest securities firm by market value has taken over Nan Tung Bank, and in the process, gained a foothold in the China’s US$5.1 trillion banking industry. Now a wholly-owned subsidiary of the New York-based firm, the Zhuhai-based Nan Tung Bank was formerly funded by a Macau-based unit of Bank of China Ltd..

Following an approval by the China Banking Regulatory Commission, the acquisition will give Morgan Stanley a banking license to offer foreign-currency denominated services, including deposits, mortgage loans, and trade finance to individual and corporate customers based primarily in the Pearl River Delta region of Guangdong Province.

Morgan Stanley believes the license would propel it ahead of its investment banking rivals, such as Goldman Sachs Group Inc., Merrill Lynch & Co. Inc. and Lehman Brothers Holdings Inc.

The securities firm is yet to win a license to offer local-currency denominated services. However, by fully acquiring Nan Tung, Morgan Stanley will be eligible to apply for a local-currency license immediately, rather than having to wait for five years should they have started their operations in China from scratch.

Nan Tung Bank, which is one of the few Chinese banks open to foreign ownership, serves customers mainly from Hong Kong and Macau.

Since joining the World Trade Organization in December 2001, China has allowed foreign banks to conduct local-currency business with companies in 25 cities. The government will also remove all geographic and business restrictions on overseas lenders by the end of this year.

Foreign banks are allowed to own up to 25% of local lenders, with a single financial institution restricted to no more than 20%, which is 5% higher than in 2003.