Mon, Aug 20, 2018 - Page 16 News List

FSC finalizes rules for Web-only banks

CREATING FLEXIBILITY:While more than half of an online-only bank’s board would have to be industry experts, non-financial enterprises could own up to 60 percent of it

By Ted Chen  /  Staff reporter

The Financial Supervisory Commission (FSC) is to allow non-financial enterprises a majority stake in Taiwan’s Web-only banks.

The commission on Thursday finalized its guidelines for applicants seeking to compete for the two online-only bank licenses it is to issue.

The guidelines stipulate that non-financial enterprises are allowed to hold up to a 60 percent stake in an online-only bank, while lowering the minimum holding of financial institutions to 40 percent.

The change aims to create greater flexibility for non-financial sector companies to foster innovation, the commission said.

The change is a reversal of FSC Chairman Wellington Koo’s (顧立雄) earlier proposal that the banks should be majority-owned by financial institutions, as they have the experience to help newly established online-only banks comply with regulations.

However, more than half of the board of directors of Web-only banks must be represented by industry experts with backgrounds in banking, financial technology, e-commerce or telecommunications, the commission said.

Although non-financial enterprises can collectively hold a majority 60 percent stake, online-only banks must have at least one financial sector partner holding a 25 percent stake, the commission said.

Web-only banks should be considered a long-term investment, and financial companies would have to be prepared for the long haul, CTBC Financial Holding Co (中信金控) president Daniel Wu (吳一揆) said at a company investors’ conference on Wednesday.

In entering uncharted waters, it could take up to five years for online-only banks to turn profitable, Wu said, adding that financial holding companies would need to carry losses from the venture on their books due to the commission’s requirements.

Wu said that CTBC Financial has prioritized the Indonesian and Philippine markets for online-only banks, with local technology industry partners leveraging the company’s existing bank branches in the countries.

Online banking is a much more efficient way to cover the two populous nations’ vast territories, which are made up of thousands of islands, he said.

Online-only banks would be required to meet the same anti-money laundering and illicit transaction rules as other banks, but E.Sun Financial Holding Co (玉山金控) president Joseph Huang (黃男州) said he expects disruptive changes in financial regulations as new business models emerge.

Even without online banks, Web services have already reduced bank branch visits by 30 percent in the past two years, Huang said at an investors’ conference on Thursday.

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