Tue, Jan 04, 2005 - Page 10 News List

Banking sector gets competitive

REFORMS Many observers laud improvements in the health of the finance sector last year, including reduced bad loans, but more consolidation is needed

By Joyce Huang  /  STAFF REPORTER

Consolidation may also apply to the securities sector since "small securities firms may be shaken [out of the marketplace] as the competition stiffens to benefit big players," said Susan Chu (朱素徵), associate director at Taiwan Ratings Corp (中華信評).

New business may also come from abroad, especially China, as some local financial service providers appear eager to enter the Chinese market. Fubon Financial's acquisition of Hong Kong-based International Bank of Asia (港基銀行) last year is an example of this.

Currently, some 10 banks have set up liaison offices there, which will be later upgraded to branches. But pundits said that no progress will be foreseeable this year given the current cross-strait tensions.

"Due to the lack of a bilateral agreement between Taiwan and China to regulate cross-strait financial transactions, Taiwanese liaison offices there are unlikely to be upgraded to branch status," Lo said.

To provide a makeshift channel for local banks to capture cross-strait businesses, Tseng said the regulator will further relax restrictions on the business scope of offshore banking units (OBUs) so as to meet China-based businessmen's financial needs.

"Offshore banking units will be the best leverage for Taiwanese banks to develop regional businesses," Tseng said.

To secure a more stable source of income, local financial institutions are beginning to sell more products and focusing efforts on the wealth management business.

According to Eric Wu (吳東昇), chairman of newly established Taishin Investment Trust Co (台新投信), nearly NT$2.5 trillion -- or 40 percent to 50 percent of people's earnings -- are deposited in saving accounts, which he said could potentially be injected into the nation's fund market.

Martin Spurling, deputy CEO and senior vice president of HSBC Taiwan's personal financial services division, also aims to tap into the asset-management market.

He said that if Taiwanese can be further educated to invest part of their cash deposits in mutual funds, this could provide one of the British bank's biggest business opportunities -- and challenges -- this year.

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