Fri, Jul 04, 2003 - Page 10 News List

Bank merger improves transparency

By Joyce Huang  /  STAFF REPORTER

The recent incorporation of three state-run banks, including the Bank of Taiwan (BOT, 台灣銀行), Land Bank of Taiwan (土銀) and Central Trust of China (中央信託局), will help improve transparency while strengthening competitiveness to face stiff market competition, pundits said yesterday.

"The move will force the three state-run banks to improve their financial transparency in the near future like other private corporations," said William Fong (方偉昌), an analyst at Primasia Securities Co, adding the three banks make up a total market share of 25 percent.

"Standing on a firm legal footing now, the three have taken a baby step toward privatization, which is slated to be completed by 2006," said Chou Tein-chen (周添城), an economics professor at National Taipei University.

BOT chairman Chen Mu-tsai (陳木在), on Tuesday vowed to release 52 percent of the bank's government-owned shares within the next three years while Land Bank and Central Trust of China plan to consolidate and form a financial-holding company.

Land Bank chairman Wei Chi-lin (魏啟林) yesterday said that he plans to list the yet-to-be-established financial holding company on the stock market in early 2005 after recruiting other commercial banks, investment banks and securities houses and insurers into the mega financial holding company.

However, to further strengthen the bank's competitiveness, Wei added that he plans to merge with another local financial-holding company with foreign management expertise in 2006 while facilitating its privatization plan.

"We expect to dilute government-owned shares in the to-be-privatized financial institution from 100 percent to below 40 percent," Wei said yesterday.

Fong yesterday said the performance of the three state-run banks in the next three years will be key to whether state-own shares can attract buyers.

"Foreign investors used to hold bearish views about state-run banks, which are considered to be very conservative and comply with government policies," Fong said.

The incorporation move, therefore, is sure to benefit the banks' plans to release government-owned shares in the future although forthcoming challenges in corporate and consumer banking are still ahead for them to conquer, he added.

According to Wei, challenges to the banks' privatization plans include a legislative approval to follow through the privatization plan, efforts to write off non-performing loans and to maintain bank stability while bringing in international and professional financial expertise to improve bank health.

Mei Chiang (蔣梅香), director of Taiwan Ratings Corp's (中華信評) financial service department, however, yesterday said that it is still too early to tell how the incorporation move will help improve the three state-run banks' financial health.

She said that, if these state-run banks are still allowed to undertake government-instigated loans to corporate and consumers to maintain their market shares, their ratings may remain stable.

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