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Ministry expecting upwards of 10 applications for holding companies

Taiwan's Minister of Finance Yen Ching-chang (顏慶章) said yesterday that he expected at least 10 applications to set up financial holding companies in November.

"My colleagues are now busy working on enforcement rules for the new statute that is bound to bring about radical changes in our financial landscape," Yen said during a luncheon for foreign correspondents based in Taipei.

The holding company law is due to become effective on Nov. 1 to provide legal grounds for such establishments.

Yen said the banking sector has to consolidate to improve sharply-eroded profit margins and increase competitiveness.

Taiwan's financial market is overcrowded with a total of 53 domestic banks and 360 grassroot institutions against a population of 23 million people.

The recent management changes at Bank of Taiwan (台灣銀行) and Central Trust of China (中央信託局) reflected the government's resolve to complete their consolidation with Land Bank of Taiwan (台灣土地銀行) to become a financial holding company, he said.

Yen said foreign investors would be given 100 percent national treatment for their investment in local banking business based on the merger law and the holdings company law.

Also, he said 10 state-controlled banks would complete the takeover of 36 problematic grassroots financial institutions by mid-September as a part of ongoing financial reform, he said.

This activity started last week with the transfer of a farmers' credit cooperative to United World Chinese Commercial Bank (世華聯合銀行) , he said.

The takeover of 36 troubled grassroots financial institutions, which account for just a combined 1 percent of the domestic banking market, was meant to send a message that the government is serious about reducing non-performing loans in the banking sector, he said.

In terms of improving banks' asset quality, the government is establishing a NT$140 billion (US$4.05 billion) financial restructuring fund in the four years for the disposal of bad loans, he said.

The establishment of asset management companies was encouraged to help such disposals, with a good portion from the property sector, he added.
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