In Pursuit of Presence or Prominence? (eBook)

Preface 6
The Project Team 8
Project Leaders 8
Members 8
Expert Advisory Committee (Alphabetical Order of Last Name Pinyin) 8
Expert Committee Secretary-General 9
Sponsoring Institutions 9
Contents 10
List of Figures 14
List of Tables 17
Abstract 20
Prologue 23
1 Changes in the Domestic and International Economy 25
1.1 Growing Complexity in Global Economy 25
1.2 China’s Economy Aligned Stability with Sustainable Progress 29
1.3 “The Belt and Road” Initiatives Yielded Striking Outcomes 32
1.4 Financial System Continued to Reform 33
1.4.1 Interest Rate Marketization Achieved Substantial Progress 33
1.4.2 RMB Internationalization Attained Major Breakthroughs 34
1.4.3 Internet Finance Presented Diversified Development 35
1.5 Financial Institutions Embraced the World 39
2 Status of Chinese Banks’ Internationalization 42
2.1 Status of Chinese Commercial Banks’ Internationalization 43
2.1.1 Growth Rate of BII Slowed and the Gap Between China’s Big Five Banks and Joint-Stock Banks Narrowed 43
2.1.2 The Scale of Overseas Business Continued to Expand with Increasingly Diversified Services 49
2.1.3 Global Coverage Achieved and Higher Focus on “The Belt and Road” Initiatives 52
2.1.4 Human Resources Was Better Structured and Talent Training Was Significantly Strengthened 55
2.1.5 International Influence Was Strengthened and Global Recognition Was Achieved as G-SIBs Banks 56
2.1.6 Risk Events Occurred, and Robust Risk Management Is Critical for Banks’ Success in Internationalization 56
2.2 Status of Chinese Development Banks’ Internationalization 59
2.2.1 China Development Bank Plays an Important Role in Global Development Financing 59
2.2.2 The Export-Import Bank of China Helps Chinese Enterprises Go Global 61
2.2.3 Asian Infrastructure Investment Bank Links Asia and Promotes Cooperation 62
2.2.4 New Development Bank Establishes a Safe Financial Network Among the BRICS States 63
3 Status of Foreign Banks’ Internationalization 65
3.1 Foreign Banks Had Overall High BII Level but Slower Growth in Past Decade 66
3.1.1 Foreign Banks Showed Overall High Level of Internationalization and All Top 8 Banks with Highest BII Ranking Were European Banks 66
3.1.2 Foreign Banks’ Internationalization Reached Its Mature Stage and Remained Stable in the Recent Decade 68
3.2 Factors that Affect Banks’ Internationalization in View of BII 71
3.2.1 Territory Size and Economy Scale—ING Group 71
3.2.2 Level of Development in the Domestic Economy—HSBC 73
3.2.3 Level of Internationalization in Domestic Economy—Citigroup 76
3.2.4 Internationalization Level of the Currency—UniCredit Group 79
3.2.5 International Level of Domestic Companies—Deutsche Bank 81
3.2.6 Positioning in Banking Business—Credit Suisse and Wells Fargo 84
3.3 Banks’ International Development Pattern in View of Growing Path 85
3.3.1 The Organic Internationalization Pattern—Standard Chartered Bank 86
3.3.2 The Traditional Internationalization Pattern—Santander 88
4 Comparison Between Chinese and Foreign Banks on Globalization 90
4.1 Big Gap Between Chinese and Foreign Banks in BII Level and Chinese Banks Still Have a Long Way to Catch Up 90
4.1.1 Consolidated BII of China’s Big Five Banks Was 8.90, Only 1/6 of the Average BII for 16 Foreign Banks 90
4.1.2 Chinese Banks Fall Behind in Global Footprint and Need to Upgrade Their Overseas Business Structure 94
4.2 Chinese Banks’ Total Overseas Assets Kept Growing While Foreign Banks Slowly Declined 96
4.2.1 The Gap Between Chinese and Foreign Banks in Total Overseas Assets Was Narrowing and Chinese Banks Were Progressing Rapidly 97
4.2.2 Chinese Banks Continued to Increase Overseas Deposits While Foreign Banks Were Shrinking Their Footprints 102
4.2.3 Chinese Banks Actively Expanded Overseas Loan Business While Foreign Banks Reduced, and Both of Them Achieved High Level in Proportion of Overseas Loans 106
4.2.4 Chinese Banks Had Lower Number of Overseas Employees but Its Growth Rate Entered Top 5 110
4.3 Chinese Banks Yields Promising Outcome from Their Overseas Expansion, Showing Greater Long-Term Potentials Benchmarking Foreign Banks 114
4.3.1 Chinese Bank Have Lower Revenue Contribution from Overseas Business but with a Rapid Growth Rate 114
4.3.2 Chinese Banks Should Be Acknowledged with Their Profitability Generation Capability in Foreign Countries and Further Their Exploration in New Source of Profit 119
4.3.3 Chinese Banks Managed to Stabilized Their ROA in Overseas Market and Slightly Higher Than Foreign Banks 123
4.4 Chinese Banks Continued to Expand Overseas Network While the Number of Foreign Banks’ Overseas Institutions Dropped 124
4.4.1 Chinese Banks’ Global Network Extended to Six Continents with Asia-Pacific Being Their Primary Focus 125
4.4.2 Chinese Banks Continued to Establish New Overseas Branches While Foreign Banks Reduced Their Global Networks 127
5 Implications of Risks Associated with Banks’ Internationalization 131
5.1 Case Studies on Foreign Banks’ International Risk 131
5.1.1 Market Risk—Citibank’s Operation Crisis 132
5.1.1.1 Case Study 133
5.1.1.2 Lessons Learned 133
5.1.1.3 Citi’s Three-year Recovery Plan 134
5.1.2 Liquidity Risk—Bankruptcy of Lehman Brothers 135
5.1.2.1 Case Study 137
5.1.2.2 Lessons Learned 138
5.1.3 Operational Risk—The UBS Rogue Trader Scandal 139
5.1.3.1 Case Study 139
5.1.3.2 Lessons learned 141
5.1.4 Legal Risk—Severe Penalties Imposed on BNP Paribas 142
5.1.4.1 Case Study 142
5.1.4.2 Lessons learned 143
5.1.5 Integrated Risk—RBS’ Struggle 145
5.1.5.1 Case Study 145
5.1.5.2 Lessons Learned 147
5.2 Case Studies on Chinese Banks’ International Risk 148
5.2.1 Market Risk—CMBC’s Acquisition of UCBH 149
5.2.1.1 Case Study 150
5.2.1.2 Lessons Learned 151
5.2.2 Operational Risk—BOC New York Branch’s Loan Fraud 151
5.2.2.1 Case Study 151
5.2.2.2 Lessons Learned 152
5.2.2.3 Detailed Information of the Consent Order from OCC 153
5.2.3 Legal Risk—ICBC Madrid Branch’s Money-Laundering Claim 155
5.2.3.1 Case Study 156
5.2.3.2 Lessons Learned 157
6 Future Prospects of Chinese Banks’ Internationalization 158
6.1 Acknowledge the Distinct Differences Between Chinese and International Markets When Proceeding with Steady Expansion Strategy 158
6.2 Seize the Opportunity of “The Belt and Road” Initiatives with Supporting Scheme 159
6.3 Implement Internet Finance and Adopt Innovative Business Model 161
6.4 Establish a Robust Risk Control Mechanism and Prevent Various Types of Risks 163
6.4.1 Enhance Strategic Planning to Prevent Strategic Risk 163
6.4.2 Improve Risk Control Management System to Reduce Operational Risk 164
6.4.3 Be Familiar with Business Environment of Host Countries to Minimize Country Risk 164
Acknowledgement 166
Appendix ABanks Internationalization Index (BII) 168
Appendix BIntroduction of 16 Selected Foreign Banks 175