Published on Taipei Times
http://www.taipeitimes.com/News/biz/archives/2005/04/15/2003250569

Government urged to speed financial sector reforms

FASTER: If reform measures are implemented this year, the effects will be seen in 2007, just before the next presidential election, the director of Merrill Lynch said
By Jessie Ho
STAFF REPORTER
Friday, Apr 15, 2005, Page 10

The government should speed up financial reform this year if it wants to see benefits in the banking industry in the next few years, Sophia Cheng (祘睶), director of Merrill Lynch Taiwan Ltd, said yesterday.

At a press conference held by the Chung-Hua Institution for Economic Research (い竒皘) yesterday, Cheng said that if the government starts reforms this year, it will have time to modify unsuitable policies and measures, and the effect of the reform will be shown in 2007, one year before the next presidential election.

"As the next presidential election is in 2008, this year is the best timing to undertake financial reform," Cheng said.

Activity stalled

The government said last October that it wanted to cut the number of state-run banks to six by the end of this year, while increasing the market share of three domestic banks to above 10 percent.

As no substantial M&A activity has emerged since then, banking sector shares are expected to face additional pressure, Sherry Lin (狶睶甖), head of Taiwan research at Credit Suisse First Boston (CSFB), said last week.

An example is SinoPac Financial Holdings Co (地北), which is having difficulties choosing between Taishin Financial Holding Co (穝北) or International Bank of Taipei (坝蝗) as a merger partner, due to internal disagreements between the company chairman and the board of directors.

Another similar case is the proposed merger of China Development Financial Holding Corp (い地秨祇北), KGI Securities Corp (い獺靡ㄩ) and President Securities Corp (参靡ㄩ).

`Soap opera'

"The current progress [in merger deals] is like a soap opera," Cheng said, suggesting the government maintain a consistent policy on the M&A process to avoid dampening investor confidence.

As for financial stocks, which have recently being dragged down by negative news, Cheng said the sector's performance in the first half of the year will be fair. It is the next half of the year that investors' should be cautious about.

This is because of the inundation of cash-advance cards and non-collateral loans, which will result in increased non-performing loan levels among banks, Cheng said.