Fitch calls for one bank reform overseer

The lack of a single supervisor for the ailing banking sector may be detrimental to overall confidence in the system and the ability to make improvements, UK-based Fitch Ratings executive said yesterday.

"[Banking] regulation is fragmented as Taiwan has two to three regulators of the nation's financial institutions," Paul Grela, Fitch's director of financial institutions-Asia, told the Taipei Times yesterday.

"What the country needs is a centralized, coordinated approach," he said.

Grela was in town yesterday as lawmakers debated how to fund a proposed national agricultural bank. According to draft plans for the new agrobank, the institution will play a supervisory role for the grassroots financial sector.

If the government can move forward with a centralized and coordinated approach, it will create a much more robust supervisory framework, Grela said.

"In doing that, regulation will be stronger, which will lead to improvements in financial soundness and increased transparency in business transactions," he added.

Resolving the nation's huge non-performing loan problem should be priority number one, according to Grela.

The nation's average NPL ratio was 8.85 percent last year, but Fitch estimates that the figure may actually be between 12 percent and 15 percent.

Grela asserts that there is little chance of contagion from the grassroots financial sector to the commercial banks.

Fitch, one of the top three global rating agencies in the world, opened its local branch yesterday, making Taiwan the 11th Asian country to have a Fitch branch office, said Bernard de Lattre, Fitch's group managing director for Asia Pacific.

With the inception of the local office, Fitch hopes to strengthen its future focus on rating corporations and structured financial deals, de Lattre said.

"We are already far advanced on the banks side ... and we have rated a certain number of big [Taiwanese] financial companies," he said.

Charles Chang (張積豪), Fitch's associate director for corporate Asia, said the establishment of a local branch reflects investors' growing interest in Taiwan corporates, "as a vehicle for operations and potential with respect to the relationship with Chinese markets."

Chang is encouraging Taiwan corporations to develop international ratings, even though they may not have plans to issue financial instruments internationally.