Political shakeup not likely to affect finance policies

Although Standard and Poor's said on Wednesday that "politics on the island may prove a stumbling block" for the banking sector, analysts seem to have become accustomed to the nation's frequent political shakeups in recent years.

That former Democratic Progressive Party chairman Su Tseng-chang (蘇貞昌) to take over as new premier will likely have little impact on planned consolidation within the domestic finance sector, they said.

"I am kind of neutral about the change," said Jesse Wang (王嘉樞), head of research at BNP Paribas Securities (Taiwan) Co, likening the reshuffle to putting different birds in a cage -- the cage remains still the same.

The government's consolidation policy has not led to significant interference in private banks, while the ban on business expansion across the Strait is the biggest downside for the banking industry, Wang said.

What matters is any change in policy, not the premier, who is mainly an executor rather than a policy-maker in this sense, he added.

Shirley Yang (楊慶祺), a fund manager who tracks Taiwan's finance sector and helps manage a NT$1.2 billion (US$37.3 million) portfolio at Invesco Taiwan Ltd (景順投信), shared a similar view.

"The key point is policy consistency," Yang said.

As profitability is usually a major factor that analysts and ratings firms use to evaluate the domestic finance sector, the Cabinet reshuffle and possible changes in key ministers in charge of finance issues are not expected to constitute risks to the industry, she added.

"Cabinet reshuffles are normal in democratic countries," Financial Supervisory Commission chairman Kong Jaw-sheng (龔照勝) said yesterday, adding that such shakeups will not have an impact on financial policies.

In particular, the commission enjoys independence.

Kong said the commission is a professional and independent agency free from any influence and will continue to push for consolidation and moving Taiwan toward becoming a regional fundraising hub, as planned.

The Cabinet is set to resign en masse on Monday. The commission, along with the nation's central bank led by governor Perng Fai-nan (彭淮南), and the Fair Trade Commission under the leadership of Hwang Tzong-leh (黃宗樂), are independent government agencies and their heads are eligible for exemption from changes to political personnel.

To proceed with the consolidation policy, the commission plans to meet individually with the top executives of the nation's 14 financial holding companies after the Lunar New Year holiday to review their development strategies.

But none of these financial service providers have expressed an intention to merge, indicating the government may need to offer more incentives and create more catalysts to achieve further consolidation, Kong said yesterday.

“We hoped the mergers will mainly be friendly takeovers,” he said.

The financial watchdog expects to foster one to three “national champion”banks that can compete with foreign rivals within three years after 2004 when it was established, a part of the government’s second-stage financial reform that aimed to halve the number of financial groups into seven by the end of this year.