In a bid to maintain market order and improve the financial industry’s quality, the Financial Supervisory Commission (FSC) is set to amend the Banking Act (銀行法) to add penalty provisions on domestic banks that launch price wars.
The move is part of a plan proposed by the commission yesterday to strengthen the nation’s financial infrastructure and raise the industry’s competitiveness.
“Under the fast-changing external environment, domestic financial institutions have to improve their conditions to further develop in Asia,” commission Chairman William Tseng (曾銘宗) told a news conference in Taipei.
Photo: Wang Menglun, Taipei Times
The commission’s plan has 12 initiatives, which include various expectations for local players and a few mandatory regulations.
One of the initiatives is to ask domestic financial institutions to set reasonable prices for their products and services to avoid a destructive competition in the market and to enhance their risk management capability, Tseng said.
After reviewing current laws and discussions with the Fair Trade Commission, the FSC found there are punitive provisions for insurance companies and brokerage houses, but not for banks, Tseng said.
As a result, the FSC said it decided to draft an amendment to the Banking Act and develop a clear standard to punish companies that have engaged in unreasonable price-cutting, he said.
Tseng also reiterated his commission’s plan to adjust some regulations to allow private financial institutions to buy their peers through public tenders.
However, it will only allow tender offers for the purpose of mergers and acquisitions (M&A), with an interested player having to promise to receive a 50 percent stake in the merged company.
The FSC will also consider provisions to protect small retail shareholders’ rights, the eligibility of the players, freedom from shareholding controversies and the transparent funding resources, Tseng added.
Tseng said he hoped local players would be able to expand thei capital and asset scale through M&A, which may effectively reduce the number of financial institutions in Taiwan and resolving the over-banking issue.
In the meantime, the government is targeting 15 percent in return on equity (ROE) and 1 percent in return on assets (ROA) averagely for the financial industry in the long term, as the effect driven by these initiatives, Tseng said.
Although the financial industry saw its profitability rise to a record-high level last year, the sector’s ROE and ROA averaged 11.65 percent and 0.79 percent, respectively, FSC data showed.
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