The Financial Supervisory Commission (FSC) may double the minimum number of shares needed to gain a controlling stake in financial institutions in merger and acquisition activities to counter the kinds of problems that have cropped up in hostile takeovers, its acting chairman said yesterday.
"We are studying the feasibility of raising the controlling stake requirement to 50 percent from the current 25 percent," Lu Daung-yen (
The 25-percent requirement is just one of the outdated regulations the commission might revise, he said.
Lu referred to China Development Financial Holding Co's (中華開發金控) acquisition bid for smaller rival Taiwan International Securities Corp (金鼎證券), the first hostile takeover attempt in Taiwan's financial sector that came in the wake of a government drive to consolidate the sector.
According to the Financial Holding Company Act (金融控股公司法), financial holding companies are allowed to include invested financial institutions in which they control more than a 25 percent stake among their subsidiaries.
China Development holds at least a 41 percent stake in Taiwan International and four of the nine board of director seats. In reality, however, the financial group has not been able to control its nominal subsidiary as it is entitled to, due to the securities firm's strong resistance.
Lu made the remarks on the sidelines of a meeting with financial institutions on a variety of issues, including the financial sector's consolidation and exit mechanisms for banking and insurance companies yesterday. Attendees included academics, officials and top executives of financial institutions.
The commission is also considering reopening the liscense applications for financial holding companies and bank branches in response to industry demands, commission spokesperson Susan Chang (
Banks interested in applying to establish crossover financial groups include the Taiwan Cooperative Bank (合作金庫銀行) and Industrial Bank of Taiwan (IBT, 台灣工銀), the commission said.
Applications are not limited to large-scale financial institutions.
Criteria for approval could include business differentiation and diversification as well as niche market competitiveness, Chang said.
"A permanent freeze on licenses does not conform to market mechanisms," Chang said.
Financial regulators froze the licensing of bank branches in 2004 in a bid to expedite consolidation of the fragmented banking sector.
The commission would allow well-performing banks to set up more outlets while closing some branches of financially unhealthly institutions, Chang said, without giving a timeframe.
Industry veterans have been calling for further financial liberalization, with IBT chairman Kenneth Lo (駱錦明) saying that the government should promote free competition, instead of limiting the number of banks, in pursuing consolidation. He noted that the number of US financial holding firms rose from 483 to 700 after the passage of financial holding company related regulations in 1999.
Goldman Sachs' Taiwan branch chief executive officer Yu Pei-pei (余佩佩) urged more transparent and consistent rules for the disposal of state shares in order to reassure the public that certain financial syndicates would not benefit. He also called for government-appointed directors to be more active in the share sale process.
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