Taiwan may further ease cross-strait banking rules, giving domestic lenders more room to expand in China, once regulators work out an exposure mechanism, Financial Supervisory Commission Vice Chairwoman Lee Jih-chu (李紀珠) said yesterday.
The Cabinet may soon place the issue on its agenda after President Ma Ying-jeou (馬英九) gave his go-ahead earlier this week, Lee said.
The deregulation plan proposes allowing domestic lenders to establish subsidiaries and branches in China as well as acquire shares in Chinese peers based on their expansion needs, so long as they meet risk control requirements.
Currently, they can only choose two of the three ways for development in the fast-growing Chinese market.
“We think it is unnecessary for Taiwan to hold on to restrictions in areas where Chinese authorities give a free hand,” Lee said by telephone. “It is like making people choose between tools of defense in the face of attack when they can have them all.”
Chinatrust Financial Holding Co (中信金控), the nation’s third-largest financial service provider by assets, has said it would ditch plans to open a branch in China and press directly for setting up a subsidiary as the latter has greater flexibility in operating business.
Taiwanese banking branches in China cannot take large deposits and have to prove profitable one year after establishment to qualify for applying to operate Chinese-yuan businesses. Their loans cannot more than double the sum of their local deposits and interbank lending.
The restrictions severely constrain Taiwanese lenders’ competitiveness and profitability in China, the sector has said.
The commission proposes raising the limit threefold or higher if lenders can effectively exercise risk management, Lee said.
It is now up to the Cabinet to decide when to announce relaxation details and how it would settle divergences over risk concerns, a new design to cross-strait banking rules, she said.
The central bank suggests setting individual lenders’ exposure to China at 50 percent of their net worth, while the commission prefers a looser cap of 60 percent, various local media reported, without citing their sources.
Limits imposed by China remain intact pending talks between bilateral banking regulators, Lee said. That means Taiwanese banks can still own up to a 20 percent stake in Chinese peers.
Lee declined to comment on any cross-strait contact or the timing for the deregulation, but added it should take effect soon now that the Presidential Office has voiced its support.
The two sides agreed to open their banking markets to bilateral lenders last year, in line with the financial memorandum of understanding inked a year earlier.
In related news, SinoPac Financial Holdings Co (永豐金控) yesterday reported NT$705 million (US$24.41 million) in net income last month, rising 5.65 times more than in June, thanks to dividend income on long-term equities investment, the company said in a statement.
In the first seven months, cumulative net income totaled NT$4.04 billion, jumping 55.38 percent from a year earlier and translating into earnings of NT$0.58 per share, it said.
The banking subsidiary, Bank SinoPac (永豐銀行) contributed 65.67 percent of the group’s net profit last month while its brokerage arm, SinoPac Securities Co (永豐金證券), took up 33.48 percent, SinoPac Holdings added.