Thu, Apr 12, 2018 - Page 12 News List

Cathay Financial cancels Malaysia deal

REGULATORY OBSTACLES:Several Taiwanese banks have set up offices in Malaysia, but strict controls on licenses have prevented them from being upgraded to branches

Staff writer, with CNA

Cathay Financial Holding Co (國泰金控), one of the nation’s largest financial institutions, yesterday said it has terminated an agreement to acquire the Malaysian banking assets of Canada-based Bank of Nova Scotia, commonly known as Scotiabank.

In a filing with the Taiwan Stock Exchange, Cathay Financial said it decided to end an agreement to acquire Scotiabank’s Malaysian subsidiary, Bank of Nova Scotia Bhd, because certain terms of the transaction were not fulfilled.

Cathay Financial did not provide further details on exactly why the acquisition fell through, as the two sides had signed a nondisclosure agreement.

Cathay Financial vice president Teng Chung-yi (鄧崇儀) said that the acquisition price was not the problem.

In late May last year, Cathay Financial announced it would spend US$255 million on acquiring the subsidiary through its wholly owned units Cathay United Bank (國泰世華銀行) and Cathay Life Insurance Co (國泰人壽).

Under the agreement reached at the time, Cathay United Bank was to own a 51 percent stake in the Malaysian firm and become the first Taiwanese bank to have a subsidiary in Malaysia, while Cathay Life would hold the remaining 49 percent after the deal was finalized.

Foreign banks often have to use acquisition deals to enter the market or expand their presence, because Malaysia’s financial authorities carefully control the issuance of licenses for banks to establish branches or subsidiaries, analysts have said.

Several Taiwanese banks have set up representative offices in Malaysia, but they have faced obstacles to upgrade them into branches or secure licenses to provide services, analysts have said.

Cathay Financial planned to acquire Scotiabank’s unit to expand its presence in Malaysia beyond its Kuala Lumpur marketing office.

Cathay Financial is not the only Taiwanese financial institution to have tried and failed to acquire a bank in Malaysia.

CTBC Financial Holding Co (中信金控) was in 2016 unable to complete a deal to acquire a 100 percent stake in Royal Bank of Scotland Bhd, a subsidiary of Royal Bank of Scotland PLC, because of its failure to observe the planned acquisition schedule.

Despite Cathay Financial’s aborted deal, Financial Supervisory Commission Chairman Wellington Koo (顧立雄) told reporters on the sidelines of a legislative hearing in Taipei that it did not represent a setback for the government’s New Southbound Policy.

Since the Democratic Progressive Party took office in May 2016, the government has been aggressively pushing the policy to forge closer economic ties with economies in Southeast and South Asia to reduce economic dependence on China.

Taiwanese banks still have good chances to acquire assets in Southeast Asia, particularly digital or online banking assets, Koo said.

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