Government urged to give up control of state-run banks

Bankers yesterday urged the government to release the shares it owns in state-owned banks to accelerate the financial-service sector's consolidation.

"It's about time that the government began to think about relinquishing its grip on the banking sector," Victor Kung (龔天行), chief financial officer of Fubon Financial Holding Co (富邦金控), said at a seminar organized by Citibank Taiwan in Taipei yesterday.

According to Kung, 60 percent of savings are held in state-owned banks, which tend to provide less competitive financial services than their private counterparts.

Kung said that the privatization of state-owned banks would help boost the financial sector's performance and health.

Du Ying-tzyong (杜英宗), chairman of Citigroup Global Markets Taiwan Ltd, said he expected to see more mergers and acquisitions among state-owned banks and local financial holding companies in the next year.

He suggested that state-owned banks that are rich in assets should seek mergers or strategic partnerships with efficient private banks.

Earlier this year, Minister of Finance Lin Chuan (林全) said that the ministry wanted to see a second wave of mergers and acquisitions among financial holding companies to further beef up the banking sector's competitiveness.

The minister said the nation still had too many banks and that none of the subsidiary banking units of the nation's 14 financial holding companies had a market share above 10 percent.

A lack of innovation to stimulate demand is also troubling many domestic banks, since many of them are competing for the same niche markets, Du said.

Innovative financial products could create NT$400 million worth of business opportunities, he suggested.

Du said that the government's failure to create an "exit system" to allow banks to fail and policies that encourage differentiated management among banks was another major reason behind the nation's over-banking problems.

Du endorsed the gov-ernment's policy initiative to allow hostile takeovers in the financial sector.

He said that allowing hostile takeovers would motivate managers to become more performance-oriented and would result in the removal of ill-performing managers.

Julius Chen (陳淮舟), president of Taishin Financial Holding Co, said at the seminar that the nation's 14 financial holding companies should continue to rationalize operational costs while seeking scope expansion.

According to Chen, the cost-income ratio of the banking sector averaged 70 percent, compared with 39 percent in Singapore and 42 percent in Hong Kong.