Bank of East Asia (BEA) is looking at acquiring stakes in smaller Chinese banks and widening its deposit base on the mainland to fund its growing renminbi business.

"We have plans (to attract deposits by offering) better services, rates and bonus points to people," BEA's chairman and chief executive David Li said Tuesday. "This is why we have debit cards and credit cards to widen the cash and fund channels."

Li said BEA, one of the first locally incorporated foreign banks, is "very interested" in buying into smaller Chinese banks. The other foreign banks that have a big presence on the mainland, including HSBC and Citibank, have also bought into Chinese lenders.

"We have already looked at more than 20 city commercial banks and rural cooperatives on the mainland," Li told China Daily. "We would like to make certain that whatever we buy into adds value to both parties."

BEA would, however, insist as a precondition that it should have a voice in important decisions even though foreign banks are allowed to acquire only a 20 percent stake in a mainland bank.

The bank is also keen on having a say in the potential partner's management and expects the partner to have its accounts audited by one of the big four international auditing firms. "We are having talks" with a couple of potential targets, Li said, adding that many banks troubled by the credit crunch are looking for partners.

BEA issued its yuan-denominated credit card on the mainland yesterday, the first by a foreign lender. It is also the first overseas bank to introduce its own debit cards on the mainland earlier this year.

Banking is a business of trust, Li said, referring to the eroding credibility of many foreign banks. "We are committed to the growth and prosperity of the country... most of our staff are mainlanders and as time goes by we will become more of a local bank rather than a foreign one."

BEA, Hong Kong's fifth largest lender by market value, also opened a branch in Hefei, Anhui province on Monday, its 61st office on the mainland.

Li said it is all the more important for banks to keep sufficient reserves in uncertain times.

"Crisis is unpredictable," he said.

(China Daily December 24, 2008)