Bank Of China Pushes On With Hong Kong Merger

by Mary Swire, Tax-News.com, Hong Kong

13 June 2001

The Bank of China (Hong Kong) Ltd. (Merger) Bill 2001 is due to be tabled before the Legislative Council by legislator and bank representative of the Council, David Li Kwok-po, today. If it is passed the Bill will create the largest banking group in Hong Kong by allowing the merger of 10 member banks in the Bank of China (BOC) group to form the Bank of China (Hong Kong). Mr Li, who is also chairman of the Bank of East Asia chairman, confirmed to the local press: 'There are more than eight million agreements between the merging banks and their customers.'

Currently the SAR banking sector is dominated by the HSBC group, Standard Chartered Bank and the BOC group collectively representing about 75 per cent of the market. The general feeling among the press in Hong Kong is that the BOC's aim to build on its current status with a larger piece of the market could be problematic for smaller banks: 'Changes in market forces, like the emergence of the newly merged BOC, will impose competitive pressures on small banks,' said Arthur Lau, Fitch IBCA deputy head for financial institutions in Greater China.

The BOC has been carefully planning the merger for at least a year. In a message delivered by Liu Mingkang, Chairman and President of the BOC, on the Bank's web site, Mr Liu explained: 'The most important development overseas in the medium term will be in Hong Kong, where we are the second largest banking group. The restructuring of our operations there will be finished by the end of 2001. We shall then have a new Hong Kong-registered bank that will operate under one brand name.'

He added: 'Some distinguished international businessmen are already acting as advisors to the new Bank and will soon take up their appointments as non-executive directors of its Board. The changes in the way we operate in Hong Kong will have special implications for the overall development of the Bank. We are currently considering the best method and timing for tapping the capital markets.'

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