by V. Gerard Comizio, Kevin L. Petrasic and Helen Y. Lee of Paul Hasting LP

Introduction

On May 9, 2012, the Board of Governors of the Federal Reserve System (“Federal Reserve”) announced its approval of an application submitted by Industrial and Commercial Bank of China Limited (“ICBC”), China Investment Corporation (“CIC”), and Central Huijin Investment Ltd. (“Huijin”), all based in the People’s Republic of China, to become bank holding companies pursuant to Section 3 of the Bank Holding Company Act of 1956, as amended (“BHCA”). ICBC, CIC, and Huijin had applied to acquire up to 80% of the voting shares of The Bank of East Asia (U.S.A.) National Association (“BEA-USA”), located in New York City.¹

ICBC is China’s largest bank, with total assets of approximately $2.5 trillion, while CIC and Huijin are Chinese government-owned investment companies that do not directly engage in the business of banking and do not intervene in the day-to-day business operations of the financial institutions in which they invest.² The Federal Reserve’s unprecedented approval of a controlling investment in a U.S. bank by these mainland Chinese entities paves the way for future Chinese bank holding companies and potentially other foreign-based bank holding companies seeking to establish subsidiary banking operations in the U.S. More immediately, the Federal Reserve’s action marks a significant milestone for the Chinese government in gaining international recognition as having a comprehensive, consolidated supervision (“CCS”) regulatory regime over its banks. From a competitive perspective, the Federal Reserve’s approval of the ICBC application has profound implications for U.S., Asian, and European financial institutions, and should be well understood by the international financial community.

by Scott Horner of Osler, Hoskin & Harcourt LLP

We recently represented a US bank in Ontario on a secured refinancing for a Canadian borrower. The Canadian borrower owns a number of Canadian and US subsidiaries (the Canadian borrower and its subsidiaries, the “Loan Parties”) which delivered secured guarantees. US counsel for the bank agreed to a request of US counsel for the Loan Parties that the US security agreement contain only a grant of a security interest (in contrast to also including an assignment, charge etc. by way of security like the US security agreement did on the original financing). The bank’s US counsel stated that they accepted this request on the basis that the Uniform Commercial Code applied to insurance proceeds.