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Bank of China (Hong Kong) Limited (BOCHK) (HKSE: 2388 (http://www.hkex.com.hk/invest/index.asp?id=company/quote_page_e.asp?WidCoID=2388&WidCoAbbName=&Month=&langcode=e)) is the second largest commercial banking group in Hong Kong in terms of assets and customer deposits, with more than 300 branches in Hong Kong. Established on October 1, 2001 from a merger of 12 subsidiaries and associates of the Bank of China in Hong Kong, its holding company, BOC (Hong Kong) Holdings Limited was listed on the Hong Kong Stock Exchange in October 2002. Based on end-2003 figures, the bank had HK$763 billion in assets and earned net profit of HK$8 billion. The bank's headquarters, the Bank of China Tower, was the first building outside of the US to exceed 1,000 feet in height and recognised for its distinctive architecture.
BOCHK is one of the three banks which issue banknotes for Hong Kong, the biggest participant in the JETCO payment system, and the designated clearing bank for renminbi transactions in Hong Kong. It is legally separate from its parent, Bank of China Limited, although their share a number of directors and senior managers, and cooperate in several areas.
History
Logo of The National Commercial Bank Limited. Old Bank of China Group logo; this logo was scrapped in 2001 after the formation of BOCHK. Pre-1949
The opening of a branch of the Bank of China in Hong Kong in 1917 marked the entry of state-owned Chinese banks into the then colony's banking sector. Other banks soon followed suit, starting with Yien Yieh Commercial Bank in 1918.
By the time the People's Republic of China was established in 1949, there were 15 branches of state owned Chinese banks in Hong Kong, plus branches of nine Mainland-incorporated banks that were public-private joint ventures , namely:
- Sin Hua Bank Limited (SHB)
- China & South Sea Bank Limited (CSSB)
- Kincheng Banking Corporation (KBC)
- China State Bank Limited (CSBL)
- The National Commercial Bank Limited (TNCB)
- The Yien Yieh Commercial Bank Limited (YYCB)
- Young Brothers Banking Corporation
- Wo Sang Bank
- National Industrial Bank of China
In addition, the Chinese government established Po Sang Bank in 1949 and Nanyang Commercial Bank in 1950. Both of these were incorporated in Hong Kong.
Centralised management
In 1952, the nine public-private banks were grouped into the Joint Office of Joint Public-Private Banks. The Hong Kong branches of three of these (namely Young Brothers Banking Corporation, Wo Sang Bank and National Industrial Bank of China were closed in 1954 when their parents were scrapped, and management of the remaining six public-private banks were transferred to the Hong Kong and Macau Regional Office of the Bank of China in 1958. The Bank of China later took over management of the Hong Kong branches of Kwangtung Provincial Bank, Hua Chiao Commercial Bank Limited and the Bank of Communications. All three were incorporated in the Mainland.
1970-1980s
The Bank of China began accumulating stakes in Chiyu Banking Corporation in the 1970s. In June 1975, the Bank of China moved to increase the capital of the public-private banks. As all of the new capital were from the Chinese government, private ownership in the public-private banks were substantially reduced.
The 14 banks were rebranded as part of the Bank of China Group in the 1980s, after a common IT platform was established. Treasury and foreign currency exchange operations were also centralised.
Restructuring and listing
The Hong Kong branch of the Bank of Communications broke off from the Bank of China Group in 1998. The Bank of China Group started to restructure its operations in 1999 in preparation for an initial public offering. All minority shareholders (except for those of Chiyu) were bought out by the Bank of China.
The restructuring saw all operations of the Mainland-incorporated group members merged into Po Sang Bank. Po Sang Bank was then immediately renamed Bank of China (Hong Kong) Limited. Hong Kong incorporated Nanyang Commercial Bank and Chiyu Banking Corporation became subsidiaries of BOCHK. The merger was completed on October 1, [[2001].
BOC (Hong Kong) Holdings and Stock
BOCHKHOLD.gif
BOCHK is listed under the name of BOC (Hong Kong) Holdings Limited, a holding company whose principal subsidiary is BOCHK. The holding company is listed on the Hong Kong Stock Exchange (ticker: 2388.HK Reuters Quote (http://www.investor.reuters.com/StockOverview.aspx?country=HK&ticker=2388.HK&coname=BOC+HONG+KONG+(HOLDINGS)+LTD&mxid=100393291&target=%2fstocks%2fquickinfo%2fstockoverview&cotype=1&page=default), Bloomberg Quote (http://quote.bloomberg.com/apps/quote?ticker=2388:HK)), and as American Depositary Receipts under the symbol BHKLY.
BOC (Hong Kong) Holdings is a constituent of the Hang Seng Index and the MSCI Hong Kong index.
Operations
BOCHK passbooks and ATM cards BOCHK offers a comprehensive range of financial products and services to retail and corporate customers, similar to those offered by most commercial banks. It is primarily known for its interest-income business (taking deposits from retail customers for loans to corporates) although it has been moving into other non-interest-income areas such as personal loans, wealth management and other financial services in recent years.
BOCHK is the biggest mortgage lender in Hong Kong in the secondary market; Hang Seng Bank is the biggest in the primary market.
BOCHK resells the casualty insurance, life insurance, mandatory provident fund (pensions) and asset management services of its parent, Bank of China.
Nanyang Commercial Bank
- Main article: Nanyang Commercial Bank
Founded in 1950, Nanyang Commercial Bank is a wholly-owned subsidiary of BOCHK, with 41 branches. Nanyang primarily focuses on corporate customers, in particular small and medium sized trading and manufacturing companies. It relies on BOCHK for back-end office and IT support.
Chiyu Banking Corporation
- Main articles: Chiyu Banking Corporation and Jimei University
Founded by Chen Jiageng, an overseas Chinese in 1947, Chiyu Banking Corporation Limited has 23 branches in Hong Kong and focuses on serving the community of residents of Fujian descent in Hong Kong.
Chiyu was explicitly created by Chen to create a sustainable business with profits to be devoted to education in Xiamen and the rest of Fujian province in China. Since its founding, it has spent more than HK$1 billion in education in the province, primarily through funding Jimei University and its related schools.
JETCO
- Main article: JETCO
JETCO (traditional Chinese: 銀通) (Joint Electronic Teller Services Limited) is the biggest network of automatic teller machines in Hong Kong and Macau. JETCO was founded by BOCHK in 1982 along with the Bank of East Asia, Chekiang First Bank, Shanghai Commercial Bank and Wing Lung Bank, and at present covers all banks in Hong Kong and Macau, except for HSBC and Hang Seng Bank.
Other operations
Somewhat unusually for a bank, BOCHK also owns a travel agency and freight forwarding agent known as BOC Travel Services.
Bank notes
- Main article: Hong Kong dollar
BOCHK is one of the three banks which issue banknotes for Hong Kong, the other two being the HSBC and Standard Chartered Bank.
Bank of China began to issue Hong Kong dollar notes on 1 May 1994. Under the Bank of China (Hong Kong) Limited (Merger) Ordinance, After the restructuring, banknotes issued by the Bank of China before its merger remained legal tender after the merger and became the obligations of Bank of China (Hong Kong).
Images of the 2004 issue of BOCHK bank notes can be seen at the homepage of the Hong Kong Monetary Authority (http://www.info.gov.hk/hkma/new_hk_banknotes/eng/index.htm).
Bank of China Tower
Bank of China Tower during daytime - Main article: Bank of China Tower
The Bank of China Tower in Central houses the headquarters of BOCHK. Designed by I. M. Pei, the 70-storey building's height is 315 meters with two masts reaching 369 meters. Construction began in 1985 and the building was completed in 1989. It was the first building outside the United States to break the 1,000 feet mark, and was the tallest building in Hong Kong and Asia from 1989 to 1992.
The structural expressionism adopted in the design of this building resembles growing bamboo shoots, symbolising livelihood and prosperity. The whole structure is supported by the four steel columns at the corners of the building, with the tranangular frameworks transferring the weight of the structure into these four columns.
Corporate governance
One of the stated goals of the restructuring of BOCHK was to aggressively improve corporate governance and risk management. Issues regarding BOCHK's corporate governance were widely reported in 2003 and 2004 following allegations of misconduct. Investigations are continuing as of 2005. BOCHK subsequently reorganised and tightened internal controls, and made several executive appointments via a global replacement effort assisted by recruiter Spencer Stuart and headed by Victor Fung.
Liu Jinbao
A former CEO of BOCHK, Liu Jinbao, was abruptly transferred back to Beijing to become vice-chairman of Bank of China in May 2003. Investigations subsequently found Liu to have "committed economic crimes" in connection with his previous appointment as the head of the Shanghai branch of the Bank of China. Liu was subsequently dismissed from his post.
Liu, along with three other senior managers, were also alleged to have made "unauthorised distribution for personal purposes" of funds belong to the Bank of China before BOCHK was established.
New Nongkai loan
A special committee appointed by BOC (Hong Kong) Holdings in consultation with the Hong Kong Monetary Authority found that the granting of a HK$1.77 billion bridge loan to Chau Ching-ngai, involved "risks identified at the start (that) were not addressed adequately" and was granted despite "serious reservations expressed by the Risk Management Department (BOCHK)". Liu Jinbao was criticised by the committee and a deputy CEO, Or Man-ah, took early retirement as a result.
References
General
Allegations related to Liu Jinbao
- The Standard report (http://www.thestandard.com.hk/news_detail_frame.cfm?articleid=50168&intcatid=1)
- People's Daily report (http://english.people.com.cn/200408/06/eng20040806_152029.html)
- Bloomberg report (http://www.bloomberg.com/apps/news?pid=10000080&sid=a9zmYGWF6TRE&refer=asia)
Allegations related to New Nongkai loan
Subsequent improvements
See also
External links
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