Analysts say mergers among banks set to accelerate

Financial institutions will accelerate consolidation and reform following the passage of a key legislation, analysts said yesterday.

On Wednesday the legislature passed the Financial Holding Company Law (金融控股公司法), designed to facilitate consolidation of local banks, insurance companies, brokerages and other institutions.

"The holding company law was the most important among the bills approved because it would expand the size of financial institutions and facilitate merger and consolidation among banks," said Johnathan Lee, an analyst at HSBC Securities Corp (匯豐證券).

"After financial institutions reorganize and consolidate into holding companies, they can save costs and be more efficient."

The law also "opens a window for foreign investment" in the financial market as it further liberalizes the market, said Lin Ching-ching, a banking analyst at Grand Cathay Securities Corp (大華證券).

The move would attract an estimated US$5 billion in foreign investment in the financial market, Chinese-language media said.

The law will take effect on Nov. 1 in conjunction with a statute on a proposed financial supervisory and regulatory commission.

Several major financial groups have planned to reorganize into holding companies, including Fubon group (富邦), Lin-Yuan group(霖園), Chinatrust Bank group (中國信託) and the China Development Industrial Bank (中華開發) group.

Minister of Finance Yen Ching-chang (顏慶章) has said that up to 10 holding companies would eventually be established.