China Merchants Bank (CMB) is the largest private sector bank in China. Founded in 1987, CMB was the first shareholding commercial bank to be wholly owned by legal corporate entities in China. China Merchants Bank, still being relatively new to the US market, is interested in gaining a clearer understanding of the past business decisions that foreign banks operating in the US market have made. CMB hopes to use these learnings to develop a road map for their own business strategy for the US market, with a particular focus on wholesale and private banking.
With this goal in mind, China Merchants Bank partnered with a team of graduate students from Columbia University’s School of International and Public Affairs (SIPA). After having reviewed literature focused on cross-border incursions by banks, the team selected a group of comparable foreign banks operating in the US for closer examination. Relying on interaction with China Merchants Bank staff, public records, and interviews with financial industry experts, the teamassembled recommendations and findings to assist CMB achieve its objectives.
The team identified potential challenges and solutions associated with the business model of CMB (referred in the report as the CMB “Loop”) including conflicts of interest, capital constraints, and the constant and diverse origination of loans. In the long run, the team identified key success factors for CMB’s wholesale and private banking divisions, including but not limited to synergies between the businesses, building team capabilities, the establishment of client trust, and enhanced brand recognition.