Foreign banks eager to buy local

The nation's top financial regulator said the first takeover of a bank in Taiwan by an overseas investor will take place this year.

"Several real deals are entering final negotiations soon," Kong Jaw-sheng (龔照勝), chairman of the Financial Supervisory Commission, said in an interview on Oct. 6. He declined to name potential buyers or targets.

Kong, seeking to consolidate the nation's almost 50 lenders to improve their efficiency, said Taiwan's plan is more attractive than investing in lenders in China because the investor gets management control. The acquirer would gain access to a US$700 billion banking market where the number of millionaires swelled 6.4 percent last year to 55,400, according to a June 10 report issued by Merrill Lynch & Co.

"Taiwan is more open than China and you can take management control over a Taiwanese bank as a test before you go to China," said Andrew Chen, who oversees the equivalent of US$2.4 billion as president of HSBC Asset Management Taiwan in Taipei. "Taiwan also offers business opportunities in wealth management and channels to get contacts with Taiwanese businessmen in China."

Kong, appointed the top financial regulator in July 2004, said executives of several leading European and US financial companies have visited him to discuss investment targets.

China's "big four" banks are reorganizing themselves, including cutting their non-performing loans and selling stakes to strategic investors, to tap foreigners' expertise ahead of initial public offerings. The country allows overseas banks to buy up to 25 percent of its domestic lenders, with one financial institutional not acquiring more than 20 percent.

"In China, they invest huge money but can't get management control," Kong said in the interview. "In Taiwan, we can allow them to have management control or even 100 percent ownership of a bank. They can also leverage Taiwanese talent and systems to expand their businesses in Asia."

The commission has recently proposed further openings toward financial ties with China.

"I proposed Taiwanese banks can acquire smaller-sized regional or city banks in China if they have trading licenses of yuan," said Kong. "This still needs approval by the Cabinet and the President's Office, but I think it's just a matter of time."

Kong said the proposal is not for Taiwanese banks to buy big Chinese lenders or even second-tier national banks, as they will need a large capital base. Currently, seven Taiwanese banks have representative offices in China waiting to be upgraded to branches.

Kong will lead a delegation, including senior executives from 16 of Taiwan's leading companies, to attend an investor forum in New York on Oct. 13-14 and London on Oct. 17-18, sponsored by Euromoney Institutional Investor PLC.

"Our main purposes are to update industry development, financial reform and improve industry competitiveness," Kong said. The Taiwanese companies being represented include Cathay Financial Holding Co (國泰金控), Fubon Financial Holding Co (富邦金控), Hon Hai Precision Industry Co (鴻海精密), Chunghwa Telecom Co (中華電信), China Steel Corp (中鋼) and United Microelectronics Corp (聯電), Kong said.

He will use the opportunity to introduce the commission's planned foreign currency-denominated stock exchange, the so-called international board, to overseas investors.