BBVA, the Spanish financial institution, had entered into an agreement to sell off USD1.27 billion worth of CITIC Bank Corp shares. The purpose is to increase its capital base. It is also the latest in a series of banks opting out of their Chinese partnerships.
The Spanish bank is selling 5.1 % in the lender to state owned group CITIC Ltd. BBVA would still retain 9.9%, a hair below the regulatory threshold once crossed would mean hefty penalties for a conflict of interest through ownership of shares in another financial institution.
The increasingly stricter global rules in banking capital ratios and bank ownership of shares in another bank have placed pressure on BBVA and other lenders to set aside shares and retain greater liquidity. The legal landscape is requires more documentation as well as divestment of non core asset or business interests.
The rise in the number of foreign business exiting China comes at the time when the banking system is showing signs of stress and an economic slowdown.
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