Tue, Sep 20, 2005 - Page 10 News List

Push for banking synergy, analysts say

CONSOLIDATION The government should stress cooperation and partnerships aimed at reform in the banking sector through mergers and acquisitions, market watchers say

By Amber Chung  /  STAFF REPORTER

In the process of consolidating the nation's banking market, the Taiwanese government should place a greater emphasis on whether the merged banks could generate synergy instead of merely rushing the related policy, according to a Japanese market watcher.

The move to halve the number of state-owned banks and financial holding companies could increase efficiency in the banking sector, Japan Research Institute counselor Shigeru Adachi said in a forum in Taipei yesterday.

However, whether or not the synergy can be fully created remains in question, Adachi said, adding that banks' spontaneous cooperation and partnerships would be a preferred approach in consolidation.

Adachi made the remarks in a question-and-answer session at the Japan Financial Industry Consolidation Seminar co-hosted by the nation's financial watchdog -- the Financial Supervisory Commission -- the Taiwan Financial Services Roundtable (台灣金總) and the Taiwan Academy of Banking and Finance (金融研訓院) against the backdrop of the government encouraging consolidation in the banking sector.

The government has aimed at cutting the number of state-owned banks and financial holding companies in half by the end of next year, in a bid to foster one to three "national champion banks" with a market share over 10 percent, by assets, to compete with larger foreign rivals.

Japan's finance sector, which has suffered a bubble economy and a large amount of bad loans, has reinvented itself with the creation of globally competitive financial groups through continuous consolidation activity in recent years, commission chairman Kong Jaw-sheng (龔照勝) said.

"Many of Taiwan's banks originated from Japan's system, and that country's experience in consolidation can be a reference for Taiwan," he said.

The number of Japan's financial institutions shrank to some 618 in March last year from 1,102 in March 1980, following a series of restructurings, mergers and bankruptcies. As many as 23 large banks merged into seven financial syndicates, according to the Japan Research Institute.

Mizuho Financial Group of Japan was ranked the world's third-largest financial conglomerate this year with assets totaling US$1.3 trillion, while Mitsubishi Tokyo Financial Group and Sumitomo Mitsui Banking Corp were given the 12th and 14th places worldwide with assets of US$980 billion and US$897 billion, respectively, according to the July issue of Banker monthly magazine.

The executives of these three financial groups as well as Shinsei Bank Ltd were also invited to address the forum on their respective revamping and restructuring experiences.

Shinsei Bank was reportedly once the top bidder in the state-run Chang Hwa Commercial Bank's (彰化銀行) global depositary receipt issuance of 1.4 billion shares that failed in May, because of a lack of satisfactory offers.

A slew of foreign banks are interested in partaking in Taiwan's consolidation efforts, including Shinsei Bank, Kong said.

The official however declined to comment on whether the bank had approached the commission for advice.

In response, Shinsei Bank's president and chief executive officer, Thierry Porte, said that they are closely looking at developments in Taiwan's banking sector.

"We are open to partnerships and will be looking for opportunities," Porte said.

But "we have no specific plans" for the moment, he said, without elaborating.

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