Foreign Investors Asked to Commit 5 Year Lockup for Bank Shares

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Apr. 2 – The China Banking Regulatory Commission (CBRC) has extended the lockup period for bank shares held by foreign investors from of 3 years to 5 years or more.

CBRC chairman, Liu Mingkang, was quoted by China Daily during a recent meeting held at the Chinese Academy of Social Sciences,  that if Chinese commercial banks want to bring in foreign investors in future, the lockup period of shares held by those investors will have to be at least five years.

He did not provide further details on when the new policy will be applicable. “Extending the lockup period of shares held by foreign investors can help ease the pressure Chinese banks will face in future,” Guohai Securities analyst Feng Wei told China Daily.

Before doing a public listing, China’s three State-controlled banks brought in strategic foreign investors to help with the transition. Now, due to the global financial crisis, there has been speculation as to whether these foreign investors would sell their Chinese bank stakes to raise needed cash when the lockup period expires.

The American investment bank, Goldman Sachs, announced that it would still hold on to 80 percent of its stake in Industrial and Commercial Bank of China unitl 2010 at least.

Other banks have decided not to follow suit; selling their stakes in recent months to raise capital. The Bank of America sold its shares in China Construction Bank while Royal Bank of Scotland and UBS AG both sold all their shares in Bank of China.