NEW YORK ( TheStreet) - In what may prove to be an unheralded but game changing move earlier in May, the Federal Reserve approved plans by three of China's largest banks to establish bank branches in the U.S.

Although the Fed's approval gives China's three largest state-owned lenders to the opportunity to open banking outlets, investors and customers shouldn't expect branded banks and ATM's from the likes of Industrial and Commercial Bank of China.

Instead, the decision may have the biggest impact on specialty commercial banking units at the nation's largest banks like JPMorgan Chase ( JPM - Get Report), Citigroup ( C - Get Report), Bank of America ( BAC - Get Report) and Wells Fargo ( WFC).

On May 9, the Fed approved plans for ICBC to become a bank holding company in the U.S. and for Bank of China and the Agricultural Bank of China to open regional branches in cities like New York, Chicago and Los Angeles. That move allows the lenders to take traditional retail deposits and also establish a variety of commercial banking businesses used by corporate treasuries big and small. The Fed also approved ICBC's 80% stake in the U.S. subsidiary of Bank of East Asia, a Hong Kong listed lender with branches in New York and California.

"I think the competitive implications are enormous both in terms of the M&A market and the industry," says Gerard Comizio, a partner at Paul Hastings and the chairman of its Global Banking practice, who sees a prospect that Chinese banks scale deposits through acquisitions of regional lenders. The decision may also create a reciprocal ability for U.S. banks to bolster their investment in Chinese banking operations, adds Comizio. "My guess is you could see some interesting and surprising deals done in China soon."

Although the Fed's decision may pave the way for an eventual Chinese and U.S. bank M&A boom that will allow lenders on both sides of the Pacific greater access to potentially lucrative deposits, industry analysts see a much greater near-term impact on commercial banking businesses run by the largest banks in the U.S.

In fact, in spite of China's financial might, the Fed's decision may go unseen to depositors and ordinary banking customers in the U.S.

"For the average U.S. depositor or business owner, I don't think it's going to be something they notice," says Marty Mosby a banking analyst with Guggenheim Securities, even though he calls the decision "a watershed event." That's because the lenders may be most interested in using their charters to offer transaction and corporate banking services that will follow a natural flow of funds between U.S. and Chinese businesses, as trade between both countries continues to grow.

The three Chinese banks approved by the Fed are counted among the world's 20 largest banks, according to 2011 data from Global Finance. ICBC, which is China's largest bank with $2.5 trillion in deposits, is among the top 10 largest lenders and trumps JPMorgan's $2.3 trillion in deposits.

"When you start looking for institutional and corporate business, the Chinese banks will have insight into their own market that they can leverage off of the bat," adds Mosby, who says JPMorgan, Citigroup and Bank of America will be most impacted by the development, in addition to Wells Fargo at a smaller scale.

Already the largest banks in the U.S. have significant earnings based on corporate banking services tied to trade between the U.S. and China.

Citigroup's Institutional Clients Group and Transaction Services unit earned $2.7 billion in revenue and turned a $917 million profit in the first quarter of 2012, an area of rare growth for America's third largest lender by assets. Citigroup also said that within the unit, which holds $13 trillion in assets under custody, Asia and the emerging markets as its biggest deposit holders.

JPMorgan's similar Treasury & Securities Services unit reported revenue of $2 billion and a $351 million profit, reflecting 9% and 11% year-over-year growth, respectively. The unit increased assets under custody to $17.9 trillion as of 2012, a record.

Fred Cannon a banking sector analyst at KBW sees gradual changes to the U.S. and Chinese banking sectors that will be "a big deal" in a matter of years or even decades. "We believe it is going to be an evolution and not a revolutionary process," says Cannon.

The first step in that evolution is likely to take hold in cities tied to trade, notes Cannon. "You can see the Chinese initial push is going to be on commercial finance and trade finance, and a little trade retail," says Cannon, who sees major cities like New York, Houston, L.A., Seattle and San Francisco as being impacted. Cannon also notes the prospect of M&A in the $1 billion to $2 billion size as a possibility. Mid-sized U.S. lenders like Silicon Valley Bank ( SIVB - Get Report) and East West Bancorp ( EWBC - Get Report) may also use the changing relationship to expand their presence in China, Cannon adds.

While the Fed's approval isn't likely to grab headlines in coming quarters, investors in the largest U.S. banks should expect both a new competitive dynamic in key urban markets and in revenue areas of the largest U.S. lenders. Longer-term, the approvals may lead to profound change.

"China is approaching the U.S. in terms of the size of its GDP. It is the largest country without a banking presence in the U.S," notes Cannon, who adds that wholesale banking opportunities will open up for U.S. lenders as the Chinese economy and currency becomes less controlled.

Comizio of Paul Hastings notes that after a 15-year effort by Chinese banks to improve operations, the Fed's decision signals that they're up to international standards. Previously, ICBC and China Minsheng Banking Corp. were blocked by the Fed in making acquisitions of U.S.-based branches because of what the Wall Street Journal reported were sub-standard controls.

Still there are big near term question marks over the health of the Chinese banking sector and the ability for U.S. banks to expand in the market.

Last week Bloomberg reported that Chinese banks may miss their 2012 lending targets amid an economic slowdown. Meanwhile, Citigroup's $1.15 billion Friday sale of a 8.6% stake in Akbank, Turkey's second biggest bank by market value, adds another example of a U.S. bank divesiture in an emerging market lender. Recently, Goldman Sachs ( GS) and Bank of America sold billion dollar-plus minority equity positions in Industrial & Commercial Bank of China and China Construction Bank, respectively.

For more on bank M&A, see why the eurocrisis is the best M&A bet for U.S. superregionals and why U.S. subsidiaries may be in M&A crosshairs

-- Written by Antoine Gara in New York.