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Banking seminar says government must shelter banks

Given the nation's maturing capital markets, Taiwan should mold itself into a capital-raising hub in the Asia-Pacific region, said Benny Hu (胡定吾), chairman of the China Development Industrial Bank (中華開發工銀) at a seminar yesterday.

The nation could achieve this by developing its investment banking sector while enhancing its money supply-chain to take advantage of China's economic prosperity, Hu said.

"The nation's capital markets can effectively facilitate China-based Taiwanese businesses' financing needs and become a secondary market for multinationals to invest in shares of companies which are operating in China," Hu said, urging the government to deregulate the local banking sector.

Hu said that compared to its Chinese counterpart, Taiwan has the upper-hand in financial expertise, capabilities in research and development (R&D) and venture-capital business knowledge. Additionally, it has the world's third-largest foreign-exchange reserves -- which stood at US$177.6 billion as of June -- and personal savings as high as US$25 billion in banks.

To facilitate the goal, Hu yesterday concluded his presentation by urging the government to relax restrictions on foreign exchanges and capital inflows-and-outflows across the Taiwan Strait, as well as to allow China-based Taiwanese businesses to list on the local stock market.

Hu also urged the government to scrap the 40 percent cap on capital raised by China-based Taiwanese businesses at home for investment in China.

Those who attended yester-day's seminar, organized by the Taiwan Economy and Industry Association (台灣產經建研社), endorsed Hu's remarks.

Albert Weng (翁明正), managing director of Lehman Brothers Taiwan, further warned that, once China opens up its capital markets within the next three to five years, Taiwan will never have the chance to compete and secure shares in the markets.

"It's now or never," Weng told the seminar, adding that over-competition among the nation's banks and securities houses has seriously hurt their profitability and threatened their survival.

Despite its lagging financial and business efficiency, China has the world's second-largest foreign-exchange reserves, which stood at US$346.5 billion as of June, and savings deposits of US$680 billion in banks, according to Hu.

Weng, also expressed concern that China-based Taiwanese businesses may completely sever their connections with Taiwan if the country fails to play the role of a "money base" for them now that they have branched into China as a manufacturing base.

Hwang Min-juh (黃敏助), chairman of SinoPac Securities Corp (建華金控), said that the nation's proficiency in investment banking is still in its infancy, and requires government support to nurture its development.

Citing South Korea as an example, Hwang said that the government could designate and reserve 30 percent of the nation's investment-banking businesses for domestic banks, lest foreign banks consume the businesses even though the practice may be in violation of WTO principles.
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