Taiwan's moves to foster financial consolidation may fail if the makeup of financial holding companies does not meet market requirements, economists from Japan warned yesterday.
"If the purpose of establishing financial holding companies is only to expand the banks' economy of scale, I am afraid that [the plan] may not succeed," said Yoshimasa Nishimura, a professor of Asia-Pacific Studies from Japan's Waseda University.
The government is pushing for consolidation among the nation's lenders, and in June passed a law allowing the creation of holding companies that can acquire lenders, brokerages, insurers and money managers. Nishimura made the comments yesterday at a seminar, entitled "The challenges and outlook for Taiwan's financial reshuffle -- lessons learned from Japan's `big bang' reforms."
The seminar, held in Taipei yesterday, was co-organized by Taiwan Institute of Economic Research (TIER,
Consolidation failed in Japan some 50 years ago because most financial holding companies were controlled by Japanese plutocrats, who were unwilling to undertake risks, and thus obstructing the progress of financial reshuffling, Tanaka said.
It's important for various financial institutions to seek strategic alliances and develop a market focus that differentiates them from others, he said.
Two financial consultants from McKinsey & Co -- who claim to advise the majority of Taiwanese banks currently reviewing consolidation plans -- said that financial holding companies were not panacea that would cure all of their problems. Instead, it would be a combination of strategies that drive the organizational structure, they said.
Citing Portuguese Commercial Bank's (BCP) financial holding company as a successful model, McKinsey consultant Gregory Gibb said that BCP's customer-focused orientation has contributed to its success.
"The BCP found that if you really wanted to make a difference, it's all about understanding the customers' needs. Their business units are built around customer groups," Gibb said.
The bank also encourages knowledge transfers among the merged entities, he said.
He cited as examples BCP's two major brands -- one which focuses on elderly and higher-income groups who need retirement and investment plans and the other that specializes in providing loans and mortgages for young people, Gibb said. The bank's success lies in its strong and centralized corporate center, which focuses on the strategic planning and managing different banking segments among its subsidiaries, he said.
"[Holding companies] are worth establishing if they're built on a valuable strategy -- and there is more than one model to success," Hexter said.
"[It's all about] market differentiation -- creating products that sell, and having the channels to sell them," he said.
Meanwhile, two financial holding companies -- Fubon Financial Holding Co (富邦金融控股公司) and Hua Nan Financial Holding Co (華南金融控股公司) -- will be listed on the stock exchange today, the first two among the nine financial holding companies approved by the Ministry of Finance.
RSS