The United States Federal Reserve has announced its approval of the application by China Investment Corporation, the sovereign wealth fund of the Chinese government, to acquire indirectly up to 10 per cent of the voting shares of Morgan Stanley, a major Wall Street bank.
The U.S. central bank said that it approved the investment by the CIC after carefully considering the competitive and regulatory consequences of the acquisition. CIC, established in 2007 and holding assets worth approximately $332 billion at the end of 2009, manages China’s foreign exchange reserves.
Announcing its approval of the acquisition the Fed said in a statement, “Based on... all the facts of record, the Board has approved CIC’s application to acquire up to 10 per cent of the voting shares of Morgan Stanley pursuant to... the Bank Holding Company Act of 1956.”
The Fed however emphasised that its Board’s approval was “specifically conditioned on compliance by CIC with the conditions imposed in this order and the commitments made to the Board in connection with the application.”
In particular the Federal Reserve noted that CIC did not propose to “control or exercise a controlling influence” over Morgan Stanley and that its indirect investment would be a “passive” investment.
The Fed said the CIC had committed not to exercise or attempt to exercise a controlling influence over the management or policies of Morgan Stanley; not to seek or accept more than one representative on the board of directors of Morgan Stanley; and not to have any other director, officer, or employee with Morgan Stanley.
Further the Fed also ruled out any anti-competitive outcomes of the acquisition, arguing that based on all the facts of record, its Board had concluded that “consummation of the proposal would not have a significantly adverse effect on competition or on the concentration of banking resources in any relevant banking market.”
Morgan Stanley, with total consolidated assets of approximately $626 billion, is engaged in commercial and investment banking, securities underwriting and dealing, asset management, trading, and other activities both in the U.S. and abroad.