Just the top banks may go to China

The Cabinet announced yesterday said Taiwan's top banks may be allowed to set up offices across the Taiwan Strait.

Only the top 10 banks -- in terms of both asset value and net worth -- would be allowed to establish representatives office in China, according to a proposal made by the Ministry of Finance and the Mainland Affairs Council.

Currently Taiwanese and Chinese banks conduct all transactions via foreign banks as Taipei bans direct trade with China.

Following recent moves by the banking industry to enter the China market, the finance ministry and Mainland Affairs Council submitted a proposal to the Executive Yuan concerning the issue.

According to the finance ministry, nine banks currently meet the criteria: the Bank of Taiwan (台灣銀行), the Land Bank of Taiwan (土地銀行), the First Commercial Bank (第一銀行), the Taiwan Cooperative Bank (合作金庫), the Hua Nan Commercial Bank (華南銀行), Chang Hwa Bank (彰化銀行), United World Chinese Commercial Bank (世華聯合商銀), the International Commercial Bank of China (中國國際商銀), Chinatrust Commercial Bank (中國信託商銀).

Once the Executive Yuan approves the proposal -- expected in the near future -- the nine banks can apply to set up representative offices in China.

None of the 15 new commercial banks, including Bank SinoPac (華信商銀) or E. Sun Bank (玉山商銀), were on the list.

In order to meet calls from business leaders to ease the government's "no haste, be patient" (戒急用忍) policy that restricts trade with China, officials have been scrambling to review and amend related regulations concerning financial activities across the Taiwan Strait. The amendment proposal has already been sent to the Executive Yuan.

The government also wants to deregulate the offshore banking units of domestic banks so they can do business directly with overseas branches of China's banks.

According to the proposal, any domestic bank that wishes to set up representatives office in China would have to meet five requirements: networth and total assets have to be among the top 10 in Taiwan; capital adequacy ratio must be above 8 percent; they must have overseas representatives office or branches; they possess international banking expertise; and they have not violated important banking laws and regulations in the last three years.

The proposal indicated that representative offices would be allowed to engage in three types of businesses including: conducting business information research; gathering financial and banking information; and developing correspondence channels.

After domestic banks establish representative offices in China, finance ministry officials said, they would be better positioned to service the market.

"The move shows that the DPP administration wants to slow the pace of local bank involvement in China," said Dicky Dai (戴震), a senior market commentator.

"Most of the qualified banks are state-controlled, meaning the administration does not want cross-strait banking moves to get out of control."