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FSC vows to press financial reforms

Following President Chen Shui-bian's (陳水扁) call for the Cabinet to resume the second stage of financial reforms, the head of the Financial Supervisory Commission (FSC) pledged yesterday to continue pushing consolidation and cutting the number of local financial holding firms in half -- although without a fixed timeframe -- through non-hostile takeovers.

"We would not insist on halving the number [of financial holding firms] within one or two years this time," commission Chairman Hu Sheng-cheng (胡勝正) said at the legislature yesterday.

Four to six financial holding firms would be the best for the nation's financial market capacity, as a number of research results have suggested, Hu said.

On Wednesday, Chen surprised everyone by saying that the aims of the government's second-stage of financial reform were correct and should continue.

The second round of reform, which boasts four targets, including halving the number of financial holding companies into seven by the end of this year, was shelved in the middle of last year in the wake of mounting criticism from opposition politicians and experts.

Chen's plan came under heavy fire in the legislature yesterday, where lawmakers slammed what they termed the government's "rough"policymaking and voiced concern over potential harm to the public interest by certain private conglomerates that could benefit from the turnabout.

Grilled by lawmakers, Hu admitted that he had not been consulted about or advised of the policy turnaround beforehand, but said consolidation was always the regulator's goal, which has not changed.

The regulator disfavors hostile takeover activities and will encourage voluntary mergers and acquisitions in compliance with the market mechanism, he said.

The current market condition in Taiwan is accommodative to consolidation given rising competitive pressure after two foreign rivals took over local lenders and depositors were moving their money to healthy banks from troubled lenders, Hu said.

The watchdog commission would continue to promote the internationalization of local financial institutions by using its strength among overseas Taiwanese customers to woo foreign rivals and form strategic partnerships, as well as seek two or three good lenders with a market share of over 10 percent, he said.

The Taiwan Cooperative Bank (合作金庫銀行) has already achieved a market share exceeding 10 percent in terms of deposits, Hu said.

The Ministry of Finance is also considering a merger of the Land Bank of Taiwan (土地銀行) with the state bank transformed from the Bank of Taiwan (臺灣銀行), which is slated to take over the Central Trust of China (中央信託局) on July 1, Hu told lawmakers.
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