Regulators in Taiwan are taking another shot at consolidating a fractured financial system that is scaring off foreign investors.
The nation’s authorities last month made it easier for lenders to merge, part of a long-running campaign to whittle down an industry where assets are so thinly spread that banks struggle to compete with regional rivals.
Government policy in the 1990s created a market where tiny entities carved out niches for themselves, making them fiercely independent.
Taiwan’s 37 banks have a total of US$1.6 trillion in assets between them, about as much as Citigroup Inc.
The crowd is a double-edged sword: Taiwan’s financial sector does not have a single systemically important bank and the risk of a crisis is low, but margins have become so slim that global investors, such as George Soros, have exited over the years.
“Now it’s too difficult for the private sector to consolidate, especially as some small banks still operate quite well and big banks do not want to spend too much money for mergers,” Taiwan Mergers & Acquisitions and Private Equity Council director James Chen (陳民強) said.
“The only thing the government can do is to force state-backed banks to merge, and tackle issues such as cutting staff and opposition from labor unions,” he said.
Assets of Taiwan’s five largest lenders are only about 37 percent of the market’s total commercial banking assets, the third-lowest in the world after Nepal and Bangladesh, World Bank data showed.
In contrast, Singapore stands at 93 percent and China at 53 percent.
“Many Taiwanese banks have recognized that mergers are necessary to expand,” Banking Bureau Deputy Director-General Sherri Chuang (莊琇媛) said. “However, in Taiwanese culture, big shareholders tend not to sell their stakes as even small banks have good asset quality.”
Recognizing large stakeholders’ reluctance to sell, the Financial Supervisory Commission allowed smaller stakeholders to push for consolidation.
In rules that took effect on Nov. 30, the regulator said a bank or holding company that wants to buy another financial institution must have a minimum 10 percent existing stake in its target, lower than the 25 percent required earlier.
“Our regulators have been encouraging mergers, but I will do it only if it’s good for my company,” CTBC Bank Co (中國信託銀行) chairman Tung Chao-chin (童兆勤) said in an interview at Bloomberg’s New Delhi office on Wednesday.
CTBC Bank is Taiwan’s biggest private lender, but has limited opportunities to expand because the nation is small with too many banks, Tung said.
Taiwanese lenders earn average net interest margins of 1.36 percent, lower than the 1.43 percent among peers in Asia’s developed economies and 4.02 percent in the region’s emerging markets, according to data compiled by Bloomberg.
Yet, that could be enough for the players, said Michael On (洪瑞泰), president of Taipei-based Beyond Asset Management Co (晉昂證券投顧).
The Taiwan market is small, and there are too many banks,” On said. “Still, everybody has small bites of rice to feed themselves.”
Stephen Garrett, a 27-year-old graduate student, always thought he would study in China, but first the country’s restrictive COVID-19 policies made it nearly impossible and now he has other concerns. The cost is one deterrent, but Garrett is more worried about restrictions on academic freedom and the personal risk of being stranded in China. He is not alone. Only about 700 American students are studying at Chinese universities, down from a peak of nearly 25,000 a decade ago, while there are nearly 300,000 Chinese students at US schools. Some young Americans are discouraged from investing their time in China by what they see
MAJOR DROP: CEO Tim Cook, who is visiting Hanoi, pledged the firm was committed to Vietnam after its smartphone shipments declined 9.6% annually in the first quarter Apple Inc yesterday said it would increase spending on suppliers in Vietnam, a key production hub, as CEO Tim Cook arrived in the country for a two-day visit. The iPhone maker announced the news in a statement on its Web site, but gave no details of how much it would spend or where the money would go. Cook is expected to meet programmers, content creators and students during his visit, online newspaper VnExpress reported. The visit comes as US President Joe Biden’s administration seeks to ramp up Vietnam’s role in the global tech supply chain to reduce the US’ dependence on China. Images on
New apartments in Taiwan’s major cities are getting smaller, while old apartments are increasingly occupied by older people, many of whom live alone, government data showed. The phenomenon has to do with sharpening unaffordable property prices and an aging population, property brokers said. Apartments with one bedroom that are two years old or older have gained a noticeable presence in the nation’s six special municipalities as well as Hsinchu county and city in the past five years, Evertrust Rehouse Co (永慶房產集團) found, citing data from the government’s real-price transaction platform. In Taipei, apartments with one bedroom accounted for 19 percent of deals last
US CONSCULTANT: The US Department of Commerce’s Ursula Burns is a rarely seen US government consultant to be put forward to sit on the board, nominated as an independent director Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest contract chipmaker, yesterday nominated 10 candidates for its new board of directors, including Ursula Burns from the US Department of Commerce. It is rare that TSMC has nominated a US government consultant to sit on its board. Burns was nominated as one of seven independent directors. She is vice chair of the department’s Advisory Council on Supply Chain Competitiveness. Burns is to stand for election at TSMC’s annual shareholders’ meeting on June 4 along with the rest of the candidates. TSMC chairman Mark Liu (劉德音) was not on the list after in December last