Unions wielding power in banking sector

"Step down! Step down!" a large group of people chanted in anger at their boss on a scorching day last September.

They were employees of the state-run Taiwan Business Bank (TBB, 台灣企銀) who were making their feelings known about the government's move to auction off its 44 percent stake in the lender, the ninth largest bank in Taiwan by assets, to private bidders.

The TBB Industrial Union launched the banking sector's first industrial action with about 60 percent of TBB's staff fighting for their jobs. The aggressive move scared potential buyers away and the auction collapsed as protesters had hoped.

The unprecedented event marked the rise of banking unions' power and thwarted the controversial second-stage financial reform through which the government hoped to consolidate the crowded banking industry by disposing of state holdings.

Nine months later, the union obtained three out of 15 board directors in the bank's management reshuffle, allowing employees a crucial say in policymaking.

"We think our previous actions were appropriate," TBB Industrial Union chairman Lin Wan-fu (林萬福) said.

"But radical action cannot last forever, and we now need to adopt a more subtle and sophisticated strategy for the next stage," Lin said.

Last December state-controlled Mega Financial Holding Co (兆豐金控) said it planned to buy a 26 percent stake in TBB within a year and merge with the bank in the coming two to three years. The third-largest financial group by assets, which had acquired a 14 percent holding in TBB, took two seats on the board of the lender last month.

The union will continue to work with the bank's other shareholders -- who helped the union in the board shakeup -- to counter the rival's takeover attempts, Lin said.

The TBB union's precedent inspired peers, with union representatives of state-controlled Taiwan Cooperative Bank (合作金庫銀行) and Farmers Bank of China (農民銀行) saying last week that they planned to take action to oppose possible alliances with foreign banks.

"We will give the government a very hard time," if the bank should hurt workers interests in its negotiations with BNP Paribas Group for any possible partnership, Taiwan Cooperative's union chairman Lin Hsin-long (林興隆) said.

It is widely rumored that BNP Paribas is going to acquire an 8 percent stake in Taiwan Cooperative, which recently merged with Farmers Bank, for about US$100 million. The bank declined to comment on the alleged deal.

Amid the intensifying union activity, the government put the brakes on its consolidation scheme in April, which originally aimed to halve the number of financial holding firms by the year's end.

The Ministry of Finance said last month that it was mulling freezing the state share disposal plans due to mounting public concern that the the plan might only benefit a few wealthy families as state shareholdings are sold in a rush at low prices. This is especially true after the boardroom tussle Mega Financial faced after a takeover attempt by smaller rival Chinatrust Financial Holding Co (中信金控).

"We don't oppose consolidation," Han Shih-Shian (韓仕賢), secretary-general of the National Federation of Bank Employee Unions (銀行員工會全國聯合會) said. "What we are against is groundless mergers and acquisitions which are of no benefit to the public or intended only to fulfill policy goals."