Another local bank considers foreign partner

The China Development Bank (CDB, 中華開發工業銀行) may be interested in cooperating with a foreign partner to establish an asset management corporation (AMC) in Taiwan.

"We are still in the process of negotiating with foreign partners," Grace Fang, vice president and acting spokesperson of CDB said yesterday.

CDB became the latest member of the list of local and international companies interested in setting up AMCs to get a piece of Taiwan's restructuring deal.

Chinatrust Commercial Bank (中信銀) is in talks with Goldman Sachs to jointly set up an AMC in Taiwan.

Other leading banks such as Lehman Brothers, Morgan Stanley and Deutsche Bank could also be interested in responding to the government's call to lure foreign bankers to handle domestic non-performing loans.

Analysts say Taiwan's bad loan ratio tops 10 percent, although official figures put it at slightly over 5 percent or nearly NT$1 trillion. A consensus estimate is that only half of that figure is recoverable. Bankers said that the government will be careful not to allow "too many" AMCS in Taiwan.

Chiang Peng-wen, spokesperson for Dah An Commercial Bank, said the government must offer solid incentives so that they will acknowledge the non-performing loans.

"It is generally a good idea," said Anthony Lok, a banking analyst who covers Taiwanese banks at Nomura International in Hong Kong.

For AMCs to succeed, analysts believe that there must be a clear mandate to take the loss if necessary, and the government will inject capital into banks if necessary.

Analysts, however, say that it may take some time before the government forms explicit guidelines governing the establishment of AMCs.

"The finance ministry is currently busy rescuing the stock market" to have any time for financial restructuring, said another banker at a major commercial bank.

Setting up AMCs will boost the local reputation of the international banks and establish key connections, which analysts say, will hold them in good stead when the government goes ahead with the privatization of nearly dozen state-owned firms in the next decade.

To lower the cost of restructuring the financial system, the government said last month that it may invite international investment banks to handle the domestic non-performing loans in Taiwan.