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MOF details plan for disposing of banking shares

The Ministry of Finance yesterday outlined its guidelines for unloading public stakeholdings in financial institutions to boost the banking sector's competitiveness.

The government has not set a timetable for financial restructuring and it has not decided on the number of state-controlled banks it plans to keep, Minister of Finance Ho Chih-chin (何志欽) told a press conference.

Information from inside the Ministry of Finance earlier had put the number at up to three.

Since state-run financial institutions account for almost half the market, mergers and share sales are needed to reduce that proportion, he said.

"The priority will be to withdraw shares from the entities where the government doesn't have control, ie, where the government doesn't hold more than half of the board seats," Ho said.

China Development Financial Holding Co (中華開發金控), Waterland Financial Holdings (國票金控), Fuhwa Financial Holding Co (復華金控), Bank of Overseas Chinese (華僑銀行) and Chang Hwa Commercial Bank (彰化銀行) would fall into this category.

The government will consider releasing shares in these five entities on the open market when their major private shareholders boost their shareholdings to between 15 percent and 20 percent -- depending on the initial capitalization size and corporate governance -- four months before the re-election of the boards of these companies.

Shares acquired by using insurance capital would not be valid, he said.

If private shareholders fail to meet the "15 to 20 percent principle," the government will increase its shareholdings or solicit proxy votes in order to obtain the management power, he said.

The new guidelines will apply to China Development Financial, which is scheduled to hold a board meeting next April.

The ministry plans to gradually reduce the number of banks in which the government holds a majority of board seats -- there are now eight -- but it didn't give a timeframe or say how many institutions would be affected.

The eight institutions are the Bank of Taiwan (台灣銀行), Central Trust of China (中央信託局), Taiwan Cooperative Bank (合作金庫銀行), Lank Bank of Taiwan (土地銀行), Taiwan Business Bank (台灣企銀), Mega Financial Holding Co (兆豐金控), Hua Nan Financial Holdings Co (華南金控) and First Financial Holding Co (第一金控).

The Bank of Taiwan is expected to merge with Central Trust of China by July 1 next year.

Mega Financial plans to take in 26 percent of Taiwan Business Bank by the end of the year.

Ho said the government would hold open auctions to unload its shares.

To qualify, financial institutions must have a clean record for the previous three years, ie, have not received a serious punishment from from Financial Supervisory Commission.

The government might also bring in one of the top 100 international institutions to participate in banking operations, Ho said.
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