April 03, 2009

State-run Bank of China said it had dropped a planned 2.3 billion yuan ($336.6 million) investment in French bank La Compagnie Financiere Edmond de Rothschild after failing to get approval from Chinese authorities.China has stepped up its scrutiny of overseas investments by domestic financial institutions since companies such as Ping An Insurance and China Investment Corp (CIC) suffered high-profile losses investing abroad.Spokesman Wang Zhaowen said Beijing-based Bank of China would not extend a March 31 deadline and the plan to buy 20 percent of the private banking and asset management business of the historic Rothschild family, agreed in September, had lapsed.

"We failed to obtain approval from relevant Chinese authorities for the deal," Wang said. "However, we will continue to seek other forms of business cooperation with Rothschild."In a notice issued in February, the China Banking Regulatory Commission, the industry watchdog, told the country's five biggest lenders, including Bank of China and Industrial & Commercial Bank of China, that it would step up regulation of their overseas acquisitions and investment."The government is getting cautious toward banks' overseas acquisitions, fearing that foreign assets involve unseen risks," said Jin Lin, analyst at Everbright Securities Co.