Fed’s Approval of Chinese Government-Controlled Bank within the U.S. Poses Serious Risks
By Rep. Lynn Westmoreland
May 18, 2012
On May 9, 2012, under the International Banking Act, the Federal Reserve Board voted to approve the application of three banks to operate within the United States that are partially operated by the Chinese government by purchasing up to 80% of The Bank of East Asia U.S.A. The Bank of East Asia has 13 branches in New York and California and has deposits of approximately $621 million. This is the first time the Federal Reserve has approved a large Chinese bank’s request to acquire a bank within the United States.
The three banks given approve to acquire The Bank of East Asia are:
- Bank of China (71% owned by the Chinese government)
- Agricultural Bank of China (83% owned by the Chinese government)
- Industrial and Commercial Bank of China (70% owned by the Chinese government)
The Industrial and Commercial Bank of China is one of the world’s largest banking companies with $2.5 trillion in assets. The largest U.S. bank, J.P. Morgan Chase, only holds $2.3 trillion in assets, making the Industrial and Commercial Bank of China larger than any U.S. bank.
I and many other lawmakers on the Financial Services Committee, the congressional regulator for the U.S. banking system, have expressed serious concerns with the adequacy of supervision of Chinese banks. We believe allowing banks owned by the Chinese government can pose serious risks to our banking system and/or to our national security interests.
For that reason, I sent a letter to Federal Reserve Chairman Ben Bernanke along with six of my colleagues on the House Financial Services Committee expressing our serious concerns about allowing these banks owned by the government of China to operate within the United States. In the letter, we also asked the Federal Reserve answer some questions regarding their decision to allow Chinese government-controlled banks to operate within the U.S. border.