Taipei Times: Taiwan’s financial market is overcrowded and fragmented. How will Bank of China set itself apart from competitors here?
Li Lihui (李禮輝): There will be both competition and cooperation between Bank of China and Taiwanese peers. We have forged cooperation ties with 29 Taiwanese banks to provide better services for Taiwanese firms in China.
Our Taipei branch will focus on corporate banking, providing deposits and loans, bills financing, underwriting corporate debt issuance, investment in financial assets and corporate bonds, among other businesses.
As for consumer banking, there are a few restrictions, including the minimum requirement of NT$3 million (US$100,700) in deposit. We would like to learn from local peers in this segment because they are more experienced in retail banking and have better knowhow in personnel management, product and technology innovations.
On the other hand, we have a large network in China and globally. We can help Taiwanese firms facilitate expansions in China.
TT: Will China’s recent interest rate cuts affect your bank’s earnings? How does it hold up amid worsening credit quality in China?
Li: China’s central bank lowered benchmark interest rates on loans and deposits by 0.25 percentage points last month. The monetary policy came in response to current macroeconomic conditions.
What is more important, the People’s Bank of China [China’s central bank] allows deposit rates to float higher and lending rates to float lower by a wider range. The adjustment is a big leap toward marketization of interest rates in China.
Surely, the rate adjustments will have some negative impact on net interest margin and interest income for all Chinese lenders. However, we can minimize the impact by restructuring our loan book, credit and customer profile and risk pricing policy.
In fact, Bank of China outperforms Chinese peers in terms of marketization. Overseas operations, which account for 23 percent of our total assets, are fully exposed to marketization and so are our foreign currency, bond and securities businesses.
It is true there are some delayed debt repayments this year, but they account for a tiny share of overall loans. Our bad loan ratio hovers at about 1 percent, a safe level by international standards.
We will step up risk control and pay close attention to public financing, real-estate lending and firms with oversupply concerns. So far, the issue does not pose a problem for Bank of China.
TT: Did you meet with Taiwan’s financial officials for talks over the yuan settlement issue during your current visit?
Li: We keep close in contact with the central bank and the Financial Supervisory Commission. Recently, I met with officials from the two agencies for discussions on business development plans. As a commercial bank, Bank of China hopes the two sides can further open their banking markets. We hope bilateral authorities can soon work out a mechanism for currency settlements.
TT: You promise Bank of China will provide Taiwanese firms with more than 200 billion yuan [US$31.48 billion] in bank loans. Is the money part of the 600 billion yuan bank loan the Taiwan Affairs Office under China’s State Council announced days earlier to ease cash demand among Taiwanese firms over the next four years?
Li: It is part of the lending program as announced by the Taiwan Affairs Office. We aim to provide no less than 200 billion yuan in the following three years.