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.”
DIVIDED VIEWS: Although the Fed agreed on holding rates steady, some officials see no rate cuts for this year, while 10 policymakers foresee two or more cuts There are a lot of unknowns about the outlook for the economy and interest rates, but US Federal Reserve Chair Jerome Powell signaled at least one thing seems certain: Higher prices are coming. Fed policymakers voted unanimously to hold interest rates steady at a range of 4.25 percent to 4.50 percent for a fourth straight meeting on Wednesday, as they await clarity on whether tariffs would leave a one-time or more lasting mark on inflation. Powell said it is still unclear how much of the bill would fall on the shoulders of consumers, but he expects to learn more about tariffs
NOT JUSTIFIED: The bank’s governor said there would only be a rate cut if inflation falls below 1.5% and economic conditions deteriorate, which have not been detected The central bank yesterday kept its key interest rates unchanged for a fifth consecutive quarter, aligning with market expectations, while slightly lowering its inflation outlook amid signs of cooling price pressures. The move came after the US Federal Reserve held rates steady overnight, despite pressure from US President Donald Trump to cut borrowing costs. Central bank board members unanimously voted to maintain the discount rate at 2 percent, the secured loan rate at 2.375 percent and the overnight lending rate at 4.25 percent. “We consider the policy decision appropriate, although it suggests tightening leaning after factoring in slackening inflation and stable GDP growth,”
Meta Platforms Inc offered US$100 million bonuses to OpenAI employees in an unsuccessful bid to poach the ChatGPT maker’s talent and strengthen its own generative artificial intelligence (AI) teams, OpenAI CEO Sam Altman has said. Facebook’s parent company — a competitor of OpenAI — also offered “giant” annual salaries exceeding US$100 million to OpenAI staffers, Altman said in an interview on the Uncapped with Jack Altman podcast released on Tuesday. “It is crazy,” Sam Altman told his brother Jack in the interview. “I’m really happy that at least so far none of our best people have decided to take them
PLANS: MSI is also planning to upgrade its service center in the Netherlands Micro-Star International Co (MSI, 微星) yesterday said it plans to set up a server assembly line at its Poland service center this year at the earliest. The computer and peripherals manufacturer expects that the new server assembly line would shorten transportation times in shipments to European countries, a company spokesperson told the Taipei Times by telephone. MSI manufactures motherboards, graphics cards, notebook computers, servers, optical storage devices and communication devices. The company operates plants in Taiwan and China, and runs a global network of service centers. The company is also considering upgrading its service center in the Netherlands into a
RSS