Thu, Dec 09, 2004 - Page 10 News List

MOF to back FSC consolidation plan

MERGERS AND AQUISITIONS Government-run financial holding companies will play a key role in the commission's efforts to reduce the sector to one or two big firms

By Joyce Huang  /  STAFF REPORTER

The Ministry of Finance will be the major mover behind the Financial Supervisory Commission's plan for the banking sector's consolidation, commission Chairman Kong Jaw-sheng (龔照勝) said yesterday.

On Tuesday, the commission announced its criteria for financial holding companies mergers as part of its efforts to create fewer but bigger financial-service companies.

"Government-owned shares [under the ministry's management] will be the best tool to motivate the financial-service sector's further consolidation," Kong said.

Government-run financial holding companies will soon consider working as a catalyst to induce the sector's mergers and acquisitions (M&As), he said.

President Chen Shui-bian (陳水扁) said in October that he wanted to slash the number of financial holding companies by half from the current 14 by 2006.

Kong said he had called Minis-ter of Finance Lin Chuan (林全) on Tuesday regarding the commis-sion's plan and will later submit the plan to the Cabinet.

While it is up to the Cabinet and the ministry's discretion to carry out the proposal, Kong said the commission will help hammer out concrete measures and incentives to strengthen the consolidation plan, which aims to create one or two leading domestic players in the financial-service sector -- or what the commission called "national champion" banks -- within the next two years.

"Our next-step goal is to create `regional champion' banks within the next three to five years since Taiwan is well positioned to be the region's financial hub, with its advantages as a manufacturing-based economy," Kong said.

On the local bourse, financial shares led gainers yesterday as investors appeared upbeat about the commission's efforts to encourage consolidation.

Mega Financial Holding Co (兆豐金控) gained 0.5 percent to NT$21.40, while First Financial Holding Co (第一金控) rose 0.4 percent to NT$27.50.

The private sector also res-ponded positively to the commission's plan, although many people feel more concrete supportive measures are necessary to make it work.

"I think the government instigated plan is necessary and feasible since the private sector lacks the incentive to consolidate further," Mega Financial's executive vice president Joseph Shieh (謝劍平) said in a telephone interview.

Mega Financial has been mentioned many times as the best catalyst for M&As.

"Mega Financial's sizable assets allow it to seek merger partners since the sector's further consolidation is inevitable," Shieh said.

He added, however, that "it is unlikely that Mega Financial will be merged with other rivals."

Thomas Wu (吳東亮), chairman of Taishin Financial Holding Co (台新金控), also gave a thumbs-up response to the commission's plan.

"Now that the government has laid down a clear direction, the private sector will understand what to do," he said.

Two government-run financial holding companies -- First Financial and Hua Nan Financial Holding Co (華南金控) -- took a more neutral view yesterday.

First Financial executive vice president Huang Hsien-chuang (黃獻全) said his company is "still evaluating the possibility of conducting M&As although no targets have been selected."

First Financial has placed its priority on a corporate streamlining plan to beef up its competitiveness, he said.

Hua Nan Financial has previously expressed interest in merging with First Financial, but was rebuffed on the grounds that the two companies have similar client bases.

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