The Royal Bank of Scotland (RBS), Europe's second largest and the world's sixth largest banking group by market capitalization, is to spend US$3.1 billion buying a 10 per cent stake in Bank of China (BOC).
BOC, which has signed a strategic investment and co-operation agreement with RBS, said yesterday in a press release that the deal still needs to be approved by relative government departments and regulators.
According to the strategic programme, the two banks will enter into broad co-operation in areas including credit cards, wealth management, corporate banking and personal lines of insurance.
In addition, they intend to establish a close co-operative relationship in major banking managerial areas, including corporate governance, risk management, financial management, human resources management and information technology.
RBS will appoint a representative to serve on the BOC board of directors.
George Mathewson, chairman of RBS, said the bank's board believes the size and growth of China represents an important opportunity.
"We have been developing our relationship with Bank of China over the last 18 months, and have been impressed by the strengths of the business and its compatibility with RBS," he said.
The combination of BOC's brand, distribution and customer base with RBS's product and operational strengths and experience will be powerful in the Chinese market, he said.
BOC Chairman Xiao Gang said the co-operation with RBS is a key step in his bank's joint stock reform.
"It is crucial to transforming our operational structure, enhancing the internal management, improving the competitiveness and promoting profitability," he said.
Wang Jianxi, vice-chairman of China SAFE Investments Ltd, the major shareholder of BOC, said bringing in international strategic investors is an important step in the deepening of the reform of the State-owned commercial banks in China.
Through strategic co-operation with RBS, BOC will be able to further enhance its corporate governance and internal control, he said.
BOC, which won a US$22.5 billion capital injection from the State in late 2003, was chosen by the government as a pilot in banking reform. It reorganized itself into Bank of China Limited, a joint-stock company, last August.
By the end of June, the bank's non-performing credit rate declined to 4.38 per cent, from 5.12 per cent at the end of last year.