Fri, Feb 09, 2018 - Page 12 News List

Minister promises increased oversight of state-run banks

REGULATORY LAPSES:The finance minister issued the warning after state- run lenders incurred fines and losses, and reported poor internal controls

By Crystal Hsu  /  Staff reporter

The Ministry of Finance is to increase oversight of state-run financial institutions to avoid regulatory breaches, Minister of Finance Sheu Yu-jer (許虞哲) said yesterday.

Sheu’s remarks came after state-run lenders, such as Mega International Commercial Bank (兆豐銀行), First Commercial Bank (第一銀行) and Chang Hwa Commercial Bank (CHB, 彰化銀行), last year reported lax internal controls and incurred losses or fines.

Mega Bank, First Bank and Taiwan Business Bank (台灣企銀) are due to elect new board directors this year.

The ministry, which owns considerable stakes in the lenders, would exercise its right and name the best candidates to protect its interests and that of employees and shareholders, Sheu said.

It is regrettable that Mega Bank had to pay an additional US$29 million fine to US federal financial regulators for compliance failures at three US branches last year, following a US$180 million fine in 2016 to the New York State Department of Financial Services for similar breaches, Sheu said.

First Bank and other state-run lenders wrote off more than NT$20.5 billion (US$697.52 million) in bad loans linked to troubled Ching Fu Shipbuilding Co (慶富造船).

Chang Hwa Bank punished two executives for taking bribes.

“However, it will take some time to introduce a legal compliance system that can effectively detect and prevent money laundering and other suspicious activity,” Sheu said, adding that it took about six years for international banking groups such as HSBC Holdings PLC and Standard Chartered PLC to do so.

The ministry is also seeking understanding from state-run bank employees about plans to cut preferential interest rates on their savings deposits, in line with pension reform for civil servants, he said.

While aware of potential resistance, Sheu said the belt-tightening move is inevitable, with new pensions rules due to take effect in July.

State-run bank employees enjoy an interest rate of 13 percent on their savings, compared with 18 percent for civil servants, public-school teachers and military personnel.

The ministry is to push for better compensation terms for state-run banks so they can retain talent and stay competitive, Sheu said.

However, Sheu turned a cold shoulder to tax credit suggestions of up to NT$24,000 per year for investment funds in local shares.

Fund houses have championed the tax change to help boost the local bourse.

Sheu said there should be sufficient incentives after the Legislative Yuan last month passed amendments to the Income Tax Act (所得稅法) to lower taxes on capital gains.

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