The Financial Supervisory Commission (FSC) yesterday approved plans to further relax cross-strait banking rules, allowing domestic lenders more flexibility in their business expansion in China as long as their total risk exposures there do not exceed their net worth.
Financial institutions may establish subsidiaries and branches for expansion in China as well as acquire stakes in more than one Chinese peer, Financial Supervisory Commission vice chairwoman Lee Jih-chu (李紀珠) said.
Previously, the commission required domestic financial institutions to choose two of three options in their China expansion plans.
“We hope the new deregulation will help domestic financial institutions catch up with foreign rivals in China, given their late start,” Lee said. “It takes a long time to secure a footing in a new market.”
The easing will take effect later this month, she said.
Under the new regulations, domestic lenders will not need to set up two branches before applying to establish a subsidiary in China, Banking Bureau Director-General Kuei Hsien-nung (桂先農) said.
Chinatrust Financial Holding Co (中信金控), the nation’s third-largest financial services provider by assets, has said it will ditch plans to open a branch in China and apply directly to set up a subsidiary, since the latter enjoys greater leeway in operating its business.
Currently, Taiwanese banking branches in China have to prove profitable one year after opening their doors to qualify for applying to operate Chinese-yuan businesses.
The commission will also remove the loan ceiling for domestic lenders’ branches in China and raise the cap on deposits they may take from individual customers there to NT$3 million (US$103,591) from the current NT$1.5 million, Kuei said.
To avoid excessive exposure to risk, the commission will introduce a risk-control mechanism under which total exposure by Taiwanese lenders to China — such as lending, investments, as well as interbank loans and borrowing — may not surpass their aggregate net worth, Kuei said, adding that the commission would consult the central bank over the calculation method.
The sector had pressed for looser restraints, capping exposure at a certain ratio of their total assets, including liability.
As of June 30, the industry’s net worth stood at NT$2.1 trillion, Kuei said.
Meanwhile, China-bound investment by Taiwanese financial service providers, including capital leasing units, may not exceed 15 percent of banking subsidiaries’ net worth or 10 percent of parents’ net worth, the FSC statement said.
The easing has no bearing on restrictions imposed by China, Kuei said, meaning Taiwanese banks can still own up to a 20-percent stake in Chinese peers.
Reports of the financial deregulation sent the sub-index on financial shares up 1.69 percent yesterday, the highest among all sub-indexes and outperforming the TAIEX’s 0.21 percent gain, stock exchange data showed.
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