By
LINGLING WEI
BEIJING—State-owned
Bank of China Ltd.
601988.SH 0.00% said it cut off a major North Korean bank accused by the U.S. of providing financial support to Pyongyang's nuclear and ballistic-missile program, in what appears to be the first publicly announced step by a Chinese government-controlled firm to sever ties with a North Korean entity.
The Foreign Trade Bank of North Korea, the country's main foreign-exchange bank, was notified that its account was closed, Beijing-based Bank of China said in a brief statement, without offering any details.
The move by Bank of China follows sanctions against North Korea announced in March by the U.S., which singled out the Foreign Trade Bank over its alleged role in the nuclear program. Under the sanctions, Washington effectively cut the bank and several North Korean officials off from the U.S. financial system.
U.S. officials have warned financial institutions around the world about the risks of doing business with the bank. American officials have raised issues involving the bank with China, though Beijing hasn't commented publicly on the issue.
The move also comes as China is under growing pressure from the U.S. as well as sectors of the Chinese public to distance itself from its longtime ally following North Korea's increasingly belligerent behavior. Beijing agreed to new U.N. sanctions against North Korea after Pyongyang conducted its third nuclear test in February. However, China has maintained trade with North Korea despite calls from Washington for a tougher stance.
It is hard to say whether Bank of China's move was a result of a government directive or whether the bank acted out of self interest.
One of China's largest state-owned banks that also has sizable and expanding operations in the U.S., Bank of China takes political direction from Chinese leaders. Analysts say its decision to cut off the North Korean bank would almost certainly require top-level government approval. Bank of China declined to comment beyond its short statement.
Some analysts say Washington's sanctions against North Korea could deter foreign banks doing business in the U.S. from dealing with the North Korean bank. Bank of China's operations in the US could theoretically be sanctioned if it continued doing business with the Foreign Exchange Bank of North Korea.
After the U.S. Treasury in 2006 blacklisted Macau-based Banco Delta Asia for allegedly helping North Korea launder money, Beijing quietly froze a number of North Korean accounts at the Bank of China's Macau branch, apparently fearing Chinese banks could be targeted by the U.S. The U.S. later unwound the action against Banco Delta Asia, which denied wrongdoing.