Chinatrust Financial Holding Co (中信金控), the nation’s third-largest financial services provider by assets, yesterday called for regulatory easing on Chinese yuan operations, saying that Taiwan could become the world’s second-largest yuan banking hub after Hong Kong if more legal flexibility was granted.
“Taiwan is well placed to outperform global markets in terms of yuan operations and realize the ambition to become the world’s offshore yuan center if the government loosens some banking regulations,” Chinatrust Financial president Daniel Wu (吳一揆) told an investors conference.
Toward that end, the Financial Supervisory Commission (FSC) must allow domestic lenders to extend yuan services, currently limited to their offshore banking units, to domestic banking units so that the yuan can function and be traded like other foreign currencies, Wu said. The policy easing would significantly boost Taiwanese banks’ wealth management, trade financing and other businesses, given the yuan’s growing importance, Wu said.
The commission must also raise the limit on yuan exposure — now capped at 100 percent of banks’ net worth — because the restriction hampers aggressive yuan business expansion, which is at odds with strong demand for the currency, Wu said.
He said yuan deposits soared more than threefold for the first half of this year to 5 billion yuan (US$786.25) at the Hong Kong branch of Chinatrust Commercial Bank (中信銀行), the group’s flagship subsidiary and main source of income.
The figures translated into a market share of between 20 percent and 25 percent, second only to state-run Mega International Commercial Bank (兆豐國際商銀), the banking arm of Mega Financial Holdings Co (兆豐金控), Wu said.
Hong Kong, seeking to solidify its leadership as yuan hub, recently allowed non-residents to open yuan deposit accounts, Wu said.
Taiwan should catch up and take advantage of yuan business potential created by trade surplus with China, he said.
At a forum on cross-strait banking exchanges held earlier yesterday, Financial Services Commission Chairman Chen Yuh-chang (陳裕璋) said the government is planning to develop niche businesses for the local financial sector in a bid to boost competitiveness at a time when cross-strait financial exchanges are on the rise.
The scope of the niche businesses is expected to be finalized by the Cabinet soon, while the Council for Economic Planning and Development is studying the feasibility of setting up a platform to help the financial sector develop the personal wealth management business, Chen said.
Last month, Chinatrust Financial posted NT$1.95 billion (US$65.16 million) in net profit, down 7.6 percent from NT$2.1 billion in June, as fee incomes from wealth management cooled slightly, Chinatrust Bank’s senior vice president Rachael Kao (高麗雪) said.
As of July 31, the group accumulated NT$12.79 billion in net profits, with earnings of NT$1.1 per share. That ranked Chinatrust Financial the fourth-highest among its local peers, after Fubon Financial Holding Co’s (富邦金) NT$1.99 in earnings per share, Mega Financial’s NT$1.29 per share and Shin Kong Financial Holding Co's (新光金控) NT$1.15.
Kao said the company’s net interest margin, a critical gauge of banks’ earnings, is likely to stagnate for the rest of the year amid a monetary easing environment worldwide.