Wed, Feb 07, 2007 - Page 12 News List

Bank of Taiwan planning holding company

By Amber Chung  /  STAFF REPORTER

State-run Bank of Taiwan (臺灣銀行), the nation's biggest lender by assets, will apply to form a financial holding company named "Taiwan Financial Holding Co" (臺灣金控), after its takeover of state-owned Central Trust of China (中央信託局) in July, the bank said yesterday.

"We hope to be the nation's leading bank and financial holding firm, as well as one of the quality banks in Asia after the merger," Bank of Taiwan chairman Tsai Jer-shyong (蔡哲雄) said.

The merger will allow the lender to expand into areas such as securities, insurance and trusts.

The bank will tender its application in the next half of this year after spinning off its securities, life insurance and asset management units after the takeover that will take effect on July 1, Tsai said.

After the merger, capitalization of the 100 percent state-owned Bank of Taiwan will rise to NT$53 billion (US$1.61 billion) from NT$48 billion, while its assets will increase to NT$2.93 trillion, or a market share of 10.86 percent, up from NT$2.67 trillion.

The Financial Supervisory Commission has said that it would discuss the requirements for the establishment of a new financial group after the Lunar New Year holiday.

"We will discuss the feedback from the industry about the preliminary conclusions made in the economic forum [last July] regarding the criteria," commission spokeswoman Susan Chang (張秀蓮) said.

According to the forum's preliminary conclusions, financial institutions are required to have NT$50 billion in capitalization and NT$700 billion in assets -- up from the previous requirement of NT$20 billion in capitalization -- to be eligible to form new financial holding firms.

Despite industry criticism of the tighter requirements, Chang said the odds are good that the commission will use the stricter criteria.

If established, the new financial holding firm would overtake Mega Financial Holding Co (兆豐金控), whose assets amount to NT$2.26 trillion, as the biggest state controlled financial group.

The merged bank could generate earnings of NT$15 billion this year after the legislature gave preliminary approval of its annual budget last month, up from some NT$14 billion this year.

The Bank of Taiwan has not given a clear timetable for privatization as its budget has yet to clear the legislature, Tsai said.

The bank, however, has reached agreement with the Cabinet about a proposal for state-run banks to use a private, professional management model to exercise full control over the decision-making about their personnel and budgets, he said.

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