The Royal Bank of Scotland Group (RBS) is to acquire a 10 percent stake in the Bank of China (BOC) for US$3.1 billion, the two banks announced on Thursday.

"The RBS Board believes the size and growth of China represents an important opportunity. The combination of BOC's brand, distribution and customer base with RBS' product and operational strengths and experience will be powerful in the Chinese market," said RBS chairman Sir George Mathewson.

"RBS is an ideal partner," said Xiao Gang, BOC chairman, adding that the move was "a substantial step in BOC's joint stock reform, crucial to transforming operational structure, enhancing internal management, improving competitiveness and promoting profitability."

The deal, signed yesterday, is subject to government and other relevant regulatory approval, said BOC.

BOC, one of China’s largest commercial banks, and RBS, Europe's second largest and the world's sixth largest banking group, will enter into broad cooperation in a range of areas including credit cards, wealth management, corporate banking and personal insurance.

In addition, the two intend to establish a close relationship in major banking managerial areas, including corporate governance, risk management, financial management, human resources management and information technology.

According to the deal, RBS will also appoint a representative to sit on the board of directors of BOC.

Wang Jianxi, Vice Chairman of Central Huijin Investment Co. Ltd., the major BOC shareholder, said bringing in international strategic investors is an important step in deepening reform of state-owned commercial banks in China.

"Through strategic cooperation with RBS, BOC will be able to further enhance corporate governance and internal control. We are confident that it will produce positive results for both sides," he said.

(Xinhua News Agency August 19, 2005)