China's banking industry watchdog has approved the acquisition of a 4.99 percent stake by the Asian Development Bank (ADB) in the Hangzhou City Commercial Bank, Friday's Shanghai Securities News reported.

ADB will acquire 66 million shares in the Hangzhou bank in east China's Zhejiang Province in a private placement, the report said.

It did not reveal how much ADB will pay for the stake, but according to an agreement signed in August, the deal could be worth up to 30 million U.S. dollars.

According to its 2005 annual report, the Hangzhou city bank held a five percent share in the local lending market. Its non-performing loan ratio was only 1.64 percent.

"Through this investment, ADB will help Hangzhou City Commercial Bank to develop corporate governance and internal control procedures as well as opportunities for commercial cooperation," ADB's principal investment officer, William Willms, said at the signing of the agreement.

ADB has already invested in the Bank of China, China Everbright Bank and Xiamen International Bank.

As China opens up its banking sector, foreign banks have been scrambling to team up with Chinese city-level commercial banks.

In November, Chinese authorities gave the green light to the acquisition of a 85.59 stake in the Guangdong Development Bank by a consortium led by Citigroup. Citigroup itself bought a 20 percent stake.