Fri, Jan 15, 2010 - Page 12 News List

Cross-strait banking awaits new rules

ON THE MONEY FSC Vice Chairman Wu Tang-chieh said regulations on market entry for banks and on Chinese QDII investment in local stocks would soon be finalized

By Joyce Huang  /  STAFF REPORTER

The nation's financial accords with China take effect tomorrow but banks on both sides of the Taiwan Strait would not be able to branch into each other's market until the Financial Supervisory Commission (FSC) finalizes new regulations, a commission official said yesterday.

Nor will Chinese qualified domestic institutional investors (QDIIs) be allowed to invest in the local bourse on Monday without the new rules, FSC Vice Chairman Wu Tang-chieh (吳當傑) told a media briefing..

※We will soon finalize the regulations on market entry for both domestic and Chinese banks as well as on Chinese QDII investment in local shares,§ Wu said.

※We will also submit our draft regulations to the Cabinet for final approval soon,§ he said.

Refusing to give a timetable, Wu said his commission had reached "a certain degree of consensus with other government agencies including the economics ministry, central bank and the Mainland Affairs Council during an inter-ministerial meeting chaired by commission head Sean Chen (陳沖) on Wednesday.

Local media speculated yesterday that the commission had proposed putting a cap on domestic financial institutions China-bound investments.

According to the draft regulation, local banks future China-bound investments may not exceed 15 percent of their net worth, the report said, citing unidentified commission officials.

At the end of October, the domestic banking sector totaled NT$1.9 trillion (US$60 billion) in net worth, the commission's statistics showed.

China-bound investments by local insurance companies or securities brokerage firms may not exceed 40 percent of their net worth, the media report said.

Domestic banks with a bad-loan ratio below 2 percent and coverage ratio higher than 60 percent will be allowed to set up branches in China, while those with a bad-loan ratio of below 1.5 percent, a coverage ratio of more than 100 percent and a tier-one capital adequacy ratio above 8 percent, will be allowed to set up subsidiaries there, the report said.

For share swaps between local and Chinese banks, a Chinese bank will be allowed to take up a smaller than 5 percent stake in a domestic publicly traded bank or a smaller than 10 percent stake in a domestic privately held bank.

Their total combined stake investments in domestic public banks may not exceed 10 percent of their Taiwan-bound investments while those in privately-held banks may not exceed 15 percent, local media reported.

Wu refused to confirm the reports, insisting that the "nothing has been finalized yet."

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