The US regulators have blocked Minsheng, the China-based bank, from acquiring United Commercial Bank, a California-based lender, in a deal that could have saved $1.7 billion in taxpayers’ money and insurance, reported The Financial Times.
Reportedly, Minsheng had requested the Federal Reserve to allow it to acquire the struggling US lender but the application was rejected and subsequently United Commercial Bank was seized by the Federal Deposit Insurance Corporation. Federal Reserve warned that the law obliged it to closely monitor Chinese regulatory practices.
The seizure of UCB is expected to cost the FDIC’s insurance fund about $1.4 billion and $298.7m in government bailout funds. It is also expected to cost Minsheng $120m for the 9.9% stake it had in UCBH Holdings, the parent of UCB, reported the newspaper.
Ken Thomas, an independent bank analyst, said: “This may rank in the top 10 mistakes by the government in dealing with the financial crisis. I am really disappointed that any branch of our government?.?.?. could step in and turn away an offer that would have reduced the cost to the taxpayers.”
Federal Reserve said: “Chinese authorities are working hard to meet the standards that would permit them to buy banks in the United States but these things can take time. We’ve been working with them as they seek to implement standards for consolidated supervision and they’re making real progress,” reported the newspaper.
