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Unit 7: Accounting for Banking Companies
acquired 100% stake in China’s Nan Tung Bank to expand its footprint in the Chinese notes
Commercial Banking Sector. The Nan Tung Bank which was founded in 1985, offered
comprehensive set of commercial banking products like deposits, home mortgage loans,
and foreign currency exchange and remittance services. But it mainly focused on foreign
funded companies and residents of Hong Kong, Macau and Taiwan. Morgan Stanley did
not have significant retail banking capabilities and the penetration of Nan Tung Bank in
terms of domestic corporate and retail accounts was nearly zero. Still, the acquisition made
Morgan Stanley a promising participant in rising Chinese banking sector.
In China, Morgan Stanley faced stiff competition from Citigroup which had acquired
85.6% stake in Guangdong Development Bank for 24.267 billion Yuan (US$3.06 billion)
in November 2006. Moreover China’s accession to WTO in 2001, promised opening of
banking sector to overseas participation over a five year period and full liberalisation by
December 11, 2006. This was expected to lead significant competition for Morgan Stanley
from international banks. In such an increasing competitive scenario, would Morgan
Stanley with acquisition of Nan Tung Bank be able to significantly mark its presence in
commercial banking sector of China?
pedagogical objectives:
l To discuss the expansion strategies and the inorganic growth strategy
l To understand the influence of government policies in the Chinese banking sector
l To discuss the competitive strategies
l To analyse the growth prospects for Morgan Stanley in China.
Questions
1. Analyse the case facts and figures.
2. Discuss the solution to the case issue.
Source: http://www.ibscdc.org/Case_Studies/Finance,%20Accounting%20and%20Control/Investment%20and%20Banking/INB0002A.htm
7.5 summary
l z Accounting is a glorious but misunderstood field. The popular view is that it’s mostly mind-
numbing number-crunching; it certainly has some of that, but it’s also a rich intellectual
pursuit with an abundance of compelling and controversial issues.
l z Accountants are often stereotyped as soulless drones labouring listlessly in the bowels
of corporate bureaucracies. But many accountants will tell you that it’s people skills, not
technical knowledge, that are crucial to their success.
l z A Company registered under the Companies Act, 1956 is required to present its financial
statements, i.e. balance sheet and profit and loss account in the format laid down in
Schedule VI annexed to the Companies Act.
l z Three copies of the balances sheet and profit and loss account prepared under Section 29
together with auditors’ report under Section 30 must be submitted to the Reserve Bank of
India within three months from the period to which they refer. However, it can be extended
up to the period of further three months by RBI.
l z Section 8 of the Banking Regulation Act prohibits a bank from buying and selling or dealing
in goods except in connection with realisation of a security held by it or in connection with
the business of collections or negotiating bills of exchange.
l z No banking company can directly or indirectly deal in the buying or selling or bartering of
goods, except in connection with the realisation of security given to or held by it or engage
lovely professional university 149
