US Could Sanction China’s Big Four Banks Over North Korean Nuclear Tests


The US could place China’s biggest banks on its sanction list as part of efforts to contain an increasing restive North Korea.

The US Treasury Department announced in August that more Chinese entities would be added to its sanctions list, with Treasury Secretary Steven Mnuchin declaring that the department would “continue to increase pressure on North Korea…[by] isolating them from the American financial system.”

Analysts now point to the vulnerability of China’s biggest banks to inclusion in US sanctions, following the blacklisting by Washington of regional Chinese lender Bank of Dandong for the provision of finance to North Korea.

Should tensions between the US and North Korea continue to escalate, far larger Chinese financial institutions could also find themselves blacklisted, particularly given reports that major state-owned lender such as Bank of China have helped the hermit nation to avoid sanctions.

China’s big four state-owned banks, who have emerged as the world’s biggest lenders in terms of assets since the Great Financial Crisis, would be hard hit by sanctions given recent efforts to expand into the United States with lending, bond issuance and trade financing operations.

According to rankings by S&P Global Market Intelligence the Industrial and Commercial Bank of China is currently the world’s biggest bank, with USD$3.47 trillion in total assets as of the end of 2016.

China’s other major state-owned lenders fill out the list of the world’s top four banks in the world, with China Construction Bank, Agricultural Bank of China and Bank of China laying claim to asset balances of between $2.60 trillion and $3.02 trillion.

Scott Seaman, director for Asia at geopolitical consultancy Eurasia Group, said to CNBC’s Squawk Box that while the US Treasury has thus far exercised caution with respect to sanctions on Chinese entities due to diplomatic and economic implications, further restrictions targeting China are likely in future.

“The US Treasury Department has often been hesitant to expand the secondary sanction regime to include Chinese SOEs (state-owned enterprises) and Chinese large banks in part because the Chinese government will react very negatively, but also it will have an impact international economies and markets,” he said.

“But we do expect the US to come up with additional restrictions on things that will probably make Beijing upset.”