Pedestrians walk past a Bank of Nova Scotia location in downtown Toronto.Louie Palu/The Globe and Mail
Bank of Nova Scotia got a positive sign from the Chinese government on Friday, gaining approval to buy a small stake in a fund-management company. However, Scotiabank is still waiting for clearance on a much bigger deal in China.
Canada's third-largest bank said it has been granted a licence in China to operate a fund-management firm in partnership with two other Chinese companies. The majority owner is the Bank of Beijing, with Scotiabank and Chinese-owned General Research Institute for Nonferrous Metals holding minority stakes in the business.
The approval is part of a program in China that lets international commercial banks operate fund-management firms in partnership with Chinese financial institutions.
It is potentially also a positive sign for Scotiabank, which has been waiting for approval on a deal to buy a minority investment in a Chinese retail bank. However, that deal has languished for more than a year as Scotiabank awaits word from the Chinese government.
Scotiabank announced in September, 2011, that it was buying a 19.99-per-cent stake in Bank of Guangzhou, a retail operation in one of China's biggest metropolitan areas. However, that deal has stalled with no word from local government officials on when a decision may come. Under Chinese rules, foreign banks cannot own 20 per cent or more of a bank in China and must be given government clearance.
Over the past year and a half, Scotiabank officials have said they do not know why approval for the minority stake in Bank of Guangzhou has taken so long, and at one point suggested that further delays may imperil the deal. However, the approval of Scotiabank's fund-manager licence in China could be seen as a sign that the Chinese government may issue a decision soon on the Bank of Guangzhou deal.
In issuing a statement on the licence approval in China, Scotiabank did not comment on the process for the Bank of Guangzhou deal.
Scotiabank also holds a 19-per-cent stake in China's Bank of Xi'an, and has commercial banking, trade and foreign exchange operations in China. The bank operates in more than 50 countries around the world, including North America, Latin America and Asia.