Mon, Jan 03, 2005 - Page 10 News List

Taiwan's banks should merge: McKinsey


Taiwan should speed up mergers of domestic banks to upgrade the global competitiveness of the nation's financial sector, according to a research report quoted by the Wall Street Journal yesterday.

The report issued by the consultancy company McKinsey & Co pointed out that an oversupply of financial institutions in Taiwan will adversely affect the country's long-term banking development, although the nation's financial-service industry ranks fourth in Asia in terms of business turnover.

Taiwan has 49 banks and more than 300 financial institutions to serve a population of only 23 million, the report said, adding that it is difficult for domestic banks to expand their business as supply has outstripped demand.

In Taipei City alone, there are an avergae 3.4 bank branches offering services to every 10,000 people, much higher than the 1.9 branches in Hong Kong and the 1.3 branches in New York, McKinsey said.

McKinsey suggested that financial institutions on the island be reduced to 15 at most, including one or two loan banks with international competitiveness, five large domestic banks and several small-sized banks operating at a profit.

The nation's financial authorities have been working actively to push for the consolidation of financial institutions over the past years, but the merger plan has not been carried out as scheduled because of strong pressure from the opposition-controlled legislature and trade unions, the report said.

McKinsey called on the government to play a more active role in pushing for bank integration.

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