The Financial Supervisory Commis-sion yesterday approved Citibank NA' s application to set up a local commercial bank -- a step forward toward completing its merger with the Taipei-based Bank of Overseas Chinese (華僑銀行).
This will be the first time a foreign financial institution has set up a commercial bank for the purpose of merging with a local lender, commission spokesperson Susan Chang (
Capitalization of the new bank is set at NT$66 billion (US$1.99 billion), she said
The establishment of a local banking subsidiary by Citibank through Citibank Overseas Investment Corp follows approval by the FSC last Thursday of the US firm's application to set up a holding company. Citibank is the second foreign bank to gain regulatory approval to establish a foreign financial holding firm in Taiwan.
By law, a foreign bank must first set up a financial holding company and then establish a subsidiary to take over all the liabilities of the target local lender before proceeding with the proposed merger.
The UK-based Standard Chartered Bank was the first foreign bank granted permission to set up a local financial holding entity to facilitate its acquisition of Hsinchu International Bank (新竹國際商銀).
Citibank, the largest foreign bank in Taiwan by assets, will merge 10 of its 11 local outlets with 55 branches of Bank of Overseas Chinese to provide retail banking services, while the remaining one outlet will focus on corporate banking, Chang said.
Citibank announced its outright acquisition of the Bank of Overseas Chinese for NT$14 billion in April as part of efforts to expand its share of the local market.
The commission yesterday also gave the green light to Lehman Brothers Inc's application to turn its local branch into a subsidiary.
The book value of Lehman Brothers' new subsidiary is NT$996 million, a commission statement showed. With an eye on Taiwan' s lucrative capital markets, the US investment bank established its Taiwan branch in November 2003.