Listing reflects China's financial heft

ICBC joins list of powerful global financial institutions deemed too big to fail

Yet another Chinese bank has been listed by the Financial Stability Board as too big to fail, underscoring China's growing significance in the global financial system.

Industrial and Commercial Bank of China Ltd, the country's biggest bank by assets, has been added to the list of banks identified by the board as systemically important in its latest report published on Nov 12, bringing the number of such institutions to 29.

ICBC holds a 20 percent stake in Standard Bank of South Africa, the main advisor for most of the mergers and acquisitions deals in Africa.

Bank of China Ltd is on the list for the third consecutive year since 2011, when the board first published the annual list.

A bank that fails may trigger a financial crisis and is seen by the board as systemically important. Banks on the list are required to have a higher capital buffer to avert any repeat of the 2008 credit freeze.

ICBC had a core capital ratio of 10.48 percent on June 30, and Bank of China had a ratio of 9.27 percent. The China Banking Regulatory Commission requires banks regarded as important to the country's banking system to have a capital ratio of at least 8.5 percent by the end of 2018.

The board is compiling the list in preparation for capital rules scheduled to be phased in starting in 2016.

It brings together banking officials from the G20 nations to coordinate financial rule-making. In November 2011, the board listed the first group of systemically important banks, to be updated each year in November. The board is chaired by Mark Carney, governor of the Bank of England.

ICBC's addition to the list benefited from the Chinese yuan's growing internationalization and its own global business expansion.

A report published by the Society for Worldwide Interbank Financial Telecommunication last month shows that the yuan has already overtaken the Swedish krona, the South Korean won and the Russian rouble as the world's eighth most actively traded currency.

In the first nine months of the year, ICBC processed 1.5 trillion yuan ($245 billion) in cross-border transactions. Its yuan-clearing network has grown to cover 70 countries and regions worldwide.

Fitch Ratings Inc, a rating agency, said in a research note on Nov 12 that the deepening of Chinese companies' trade and investment links in overseas markets creates financing opportunities for Chinese banks.

"Greater usage of the yuan in the invoicing of bilateral trade or through 'qualified' investments is an increasingly visible objective of the Chinese policy authorities," the agency wrote. "A complementary expansion of Chinese banks' presence abroad, which may facilitate the fulfillment of these objectives, therefore makes increasing sense."

ICBC has been speeding up its global push in recent years. By the end of June, ICBC's overseas assets reached $182.2 billion, accounting for 6 percent of its total assets. By the end of last year, ICBC had 383 branches in 39 countries and regions, the largest overseas branch network of any Chinese bank.

"ICBC is transforming itself from a major Chinese bank to a major global bank and carrying more and more weight in the global financial system. We will see more and more Chinese banks on the list as the yuan goes global," says Jin Lin, a banking analyst with Orient Securities Co Ltd in Shanghai.

gaochangxin@chinadaily.com.cn

(China Daily Africa Weekly 11/15/2013 page21)