FSC's request for copy of mergers sparks sale of shares

Investors yesterday sold off financial shares such as Taiwan Business Bank (台灣企銀) on news that the Financial Supervisory Commission (FSC) had asked financial holding companies to submit a copy of their merger and acquisition proposals for pre-approval before they participate in any open bids.

This news came as a shock to most interested parties, since divulging their M&A proposals before a deal is reached was to them unheard of, and could prove detrimental to the completion of a deal.

Taiwan Business Bank, for which the government is planning to sell state holdings to interested parties for the purpose of industrial consolidation, saw its shares drop 1.6 percent to close at NT$12.3 on the Taiwan Stock Exchange.

The FSC yesterday denied news reports that it had demanded a preview of the financial holding companies' acquisition plans.

Citing a letter sent to the island's financial holding companies, a Chinese-language newspaper reported yesterday that the commission required financial holding companies to lodge an application specifying details such as the estimated holdings ratio, reasons and sources of funds for acquisitions, and the impact on the financial holding companies' capital adequacy ratio, for the regulator's preview.

"It is purely a misunderstanding. We did send a notice to the nation's financial holding companies, but did not demand that they submit an acquisition program for our preview," Financial Supervisory Commission's spokesman Lin Chung-cheng (林忠正) told reporters yesterday.

According to Article 36 of the Financial Holding Company Act (金控法), financial holding companies are required to apply for the authority's approval before actual transactions happen.

Therefore, they are used to making inquiries or having communication with the commission in advance in order to prevent possible errors that could invalidate the deal. The stakes are too high to allow any failure or aftermath in significant acquisition cases, Lin said.

"But this is their call ? financial holdings are not legally obligated to do so," he said.

The administrative order, however, reportedly caused concern for the financial institution over the possible leak of commercial confidentiality during the preview procedures.