Banks encouraged to design their own innovative products

Ministry of Finance officials and other industry officials yesterday urged local banks to be more creative and stop copying their rivals' financial services and marketing techniques.

"`Innovate or die' is key for the nation's banking sector to remain competitive," Thomas Huang (黃天牧), secretary-general of the ministry's Bureau of Monetary Affairs, said yesterday during a financial reform meeting held at National Taiwan University.

Diversification

The chairman of the Taiwan Stock Exchange Corp (陳沖),Sean Chen (證交所) -- a former vice minister of finance -- also spoke at the meeting, urging banks to improve their bottom line by launching more innovative products.

"Diversification is the best way to deal with the problem of an oversupply of banks," Chen said.

There are 52 major commercial banks with over 3,500 branches nationwide.

Most choose to copy their rivals' successful marketing plans for popular products such as cards.

For example, Cosmos Bank's (萬泰銀行) launch of its George and Mary cash-advance card more than two years ago triggered a flood of similar products.

NPL ratio still a problem

Meanwhile, another participant in the National Taiwan Univer-sity meeting, Citibank country manager Eric Chen (陳聖德), praised local banks' efforts last year to clean up their bad loans.

"The efforts paid off since shares of some banks rose," he said, adding "stock investors didn't dump shares because of the losses created by the writing-off of bad loans."

According to the Bureau of Monetary Affairs, local banks wrote off a record NT$413.9 billion in bad loans as of the end of last December.

The write-offs generated over NT$100 billion in losses.

The nation's non-performing loan ratio (NPL) dropped to 8.86 percent last December from 11.74 percent last March.

Despite the decline in the NPL ratio last year, PFP Legislator Christine Liu (劉憶如) criticized the government's political interference in efforts to eliminate the bad loans, saying it has slowed progress on financial reforms.

Political interference

Liu said that in 1998 the then KMT government began adopting measures that violated the free-market mechanism, allowing the non-performing loan problem to fester and the banking sector to withhold information from the public.

She also said that erroneous financial policies by the DPP government have lead to the reforms being put on the back burner.

In response to Liu's criticisms, Huang said that the government's financial reform plan has neither slowed down nor ceased.

Huang said the government is undertaking a comprehensive financial reform plan that involves the banking sector, insurers and securities houses.

"It's a race without a finishing line," Huang said.

Huang said the government is expected to adopt a stricter NPL definition in April that will meet international accounting standards.