Two major state banks will do, says Chiou I-jen

Reiterating the administration's commitment to privatization, Vice Premier Chiou I-jen (邱義仁) yesterday said that the government only needed two state-owned banks, which together would command more than 10 percent of the market.

"This has always been the Cabinet's and my policy. It has never changed," Chiou said, while accompanying Premier Chang Chun-hsiung (張俊雄) to a luncheon with reporters at the Executive Yuan yesterday.

little progress

"The government has talked about it [privatization] many times before, but we do not foresee any significant progress before the presidential election next year," Chu Yu-chun (朱玉君), a financial analyst at SinoPac Securities Corp (永豐金證券), said in a telephone interview yesterday.

State banks are valuable resources for the ruling party during an election, she said, adding that the rules and standards for disposing state-owned banks had not been clearly set.

While the vice premier did not name which two state banks the government would like to retain, Chu said that a likely candidate would be the 100-percent state-owned Bank of Taiwan (臺灣銀行), which could be transformed into a financial holding firm.

The other one could be Mega Financial Holding Co (兆豐金控), the nation's third largest financial group, or the 100-percent state-owned Land Bank of Taiwan (土地銀行), the analyst said.

Bank of Taiwan's market share in terms of lending would reach nearly 10 percent after taking over the state-owned Central Trust of China (中央信託局) next month, and the Land Bank of Taiwan has a nearly 8 percent share of the market, according to data by SinoPac Securities.

State banks on the sale list include Taiwan Business Bank (台灣企銀), First Financial Holding Co (第一金控), Taiwan Cooperative Bank (合作金庫銀行) and Bank of Kaohsiung (高雄銀行), Chu said.

financial reform

President Chen Shui-bian (陳水扁) said last month that the government should resume the second-stage of financial reform to consolidate the nation's fragmented banking sector.

The government will continue to sell its shares in the nation's banks, said Susan Chang (張秀蓮), vice chairwoman of the Financial Supervisory Commission.

"We will continue to privatize government-owned banks," Chang said in an interview after attending a San Francisco conference to commemorate the 10th anniversary of the 1997 Asian Financial Crisis.

"As far as specific banks' privatization strategy goes, the Ministry of Finance -- not our commission -- will take the lead in decision-making," she said.

"Consolidation is right direction to go. The problem comes from policy implementation," Chu said.

The government should abide by market mechanisms and allow troubled banks to be taken over and exit the market, instead of selling healthy state banks just to meet its consolidation goal, she said.

additional reporting by Bloomberg