BANKING ABROAD: The opening of ICBC's branch in New York is
expected to lead the bank's expansion in the United State

After nearly 10 years of waiting, the Industrial and Commercial Bank of China (ICBC) received permission from the U.S. Federal Reserve (Fed) on August 5 to upgrade its office in New York to a branch.

ICBC had set up a representative office in New York in 1997, but it was barred from providing banking services and could only act as a middleman between the bank's headquarters and clients in the United States.

In accordance with the Fed stipulations, the branch will engage primarily in wholesale deposit-taking, lending, trade finance and other banking services. Although it has yet to be determined when ICBC can set up the branch, it will become the Chinese bank's business platform in the United States, fuelling trade transactions between the two countries.

Prior to this, the Fed had issued authorized banking licenses to the Bank of China in 1982, the Bank of Communications in 1989, and China Merchants Bank in 2007.

ICBC's journey to the U.S. financial market has been a bumpy one. In the past, the Fed had withheld its approval of a banking license for ICBC because of concerns over money laundering and the financial security of the United States. ICBC is one of the holdings of China's sovereign wealth fund, China Investment Corp., which is the parent company of the Central Huijin Investment Co. Ltd., the bank's largest shareholder.

But the Fed finally softened its stance during the fourth round of the China-U.S. Strategic Economic Dialogue in Washington in mid-June, because China had introduced a comprehensive anti-money laundering law and pledged to increase the transparency of its sovereign wealth fund.

The Fed issued a public statement, saying it was satisfied that Chinese regulators, including the China Banking Regulatory Commission, were actively working to put in place measures for the consolidated supervision of ICBC and controls and procedures for the proposed branch to ensure its compliance with U.S. law.

"In addition, ICBC has stated that it will apply strict anti-money laundering policies and procedures at the branch consistent with the U.S. law and regulations," the statement said.

The U.S. subprime loan debacle also helped force open the door for ICBC, because foreign companies in financial distress have an acute need for fresh sources of funding, said Guo Tianyong, Director of the China Banking Research Center at the Central University of Finance and Economics, in an article in National Business Daily.

The approval marks an important milestone in the process of globalization for ICBC, said Wu Bin, Chief Representative of the ICBC New York Representative Office, in the article. It would accelerate the bank's global operating strategy and add to the competitiveness and influence of China's financial industry in the world, he said.