Taipei Times: It has long been rumored that BNP Paribas would invest in Taiwan Cooperative Bank (
Sean Chen (陳沖): This is media speculation. As a publicly traded company, we cannot comment on that. But we will not give up any opportunity to team up with foreign investors.
This is the way to enhance and open ourselves to the outside world. Cooperation with foreign rivals can bring a great deal of stimulation to our staff members as well as new ways of thinking, like what this product selling alliance with BNP Paribas has caused.
PHOTO: WANG MIN-WEI, TAIPEI TIMES
TT: Besides BNP Paribas, any likelihood of or ongoing talks in partnership with other foreign rivals?
Chen: We are open to the possibility of collaborating with other foreign counterparts. We cannot make further comments as exposure could scare the interested parties away. Nevertheless, we prefer foreign partners that enjoy abundant product lines in banking, securities and insurance and who have a track record of friendliness in their past partnerships.
We have to test the waters by starting from product selling before going into close partnership. After all, a prudent approach is crucial, especially in the financial sector.
TT: You made a wish during the 60th anniversary ceremony last month to develop Taiwan Cooperative into a regional player. Can you elaborate on that?
Chen: Taiwan Cooperative was more like a grassroots financial institution in the past, with minimal overseas presence. We plan to focus on Asia-Pacific markets where Taiwanese companies and overseas Taiwanese will gather in the future.
The takeover of Farmers Bank of China (農民銀行) this year added two more spots in the Asia-Pacific area -- Los Angeles and Seattle -- to our original four overseas outlets. In addition, we are planning to upgrade our representative office in Hong Kong to a branch and have been studying the feasibility of entry into the market in Vietnam.
The other key market in our Asia-Pacific layout is Australia, which enjoys a great deal of Taiwanese investment and where many overseas Taiwanese are located.
Thus far Taiwanese branches there have been quite profitable. I have visited the country and talked to its financial regulator earlier this year to pave the way for our future expansion.
Our overseas development plan can be carried out step by step, without any kind of partnership with foreign banks -- after we complete our recapitalization by raising NT$4.4 billion [US$134.4 million] by year's end, which would boost the bank's capital adequacy ratio above 10 percent, a regulatory requirement for overseas expansion. We do have an internal timetable for overseas expansion but the results will depend on financial regulators at home and in host countries.
TT: What is your plan for the Chinese financial market?
Chen: The Chinese market is way beyond the level that a bank can control under current cross-strait relations. But Taiwan Cooperative was the first Taiwanese bank allowed to set up a representative office in Beijing, which we did in 2002.
We have met the two-year requirement and financially qualified to upgrade the office to a branch that can actually conduct business. Still, because governments on both sides have failed to sign a memorandum of understanding, nothing has happened.
As a large-scale and state-controlled bank, we cannot bypass the government's rules to invest in China via a third place /country like what some new, private banks have been trying.
TT: Taiwan Cooperative owns NT$2.34 trillion in assets, a bigger amount than that of most financial holding firms in Taiwan now. Any plans to evolve into a financial group?
Chen: The major benefit of upgrading Taiwan Cooperative into a financial holding firm is cross selling. There are no cross-selling restrictions under the financial group umbrella, while as a standalone bank the approval of financial regulators is a preconditions for cross selling cooperation with other financial institutions, and that is not time-efficient.
We are open to the possibility of establishing new business sectors such as in insurance, securities, securities finance and bill finance segments, as long as we find suitable partners for an economy of scale. But at the moment we do not have a clear timetable.
TT: Taiwan Cooperative became the lender to the biggest branch network in Taiwan, with 323 outlets after taking over the state-controlled Farmers Bank of China in May. How's the integration work going? Any difficulties?
Chen: The integration of the IT system, before the merger on May1, was the fastest part. It took us only four months, compared with the three years it took in some cases.
However, we did encounter difficulties in the integration of business and corporate culture. For instance, the handling of a great deal of combined bad loans and other miscellaneous issues slowed down our business in the beginning of the post-merger phase.
On the culture front, there is still an identity issue and a "yours" and "mine" divide among the staff. To ease this problem, after the merger we decided to rotate the staff to each others' branches, hoping this would help break the division.
TT: Have you seen any synergies yet?
Chen: The first effect we have seen is in the IT system, as the huge capacity of Taiwan Cooperative's renewed IT system can be efficiently utilized after taking over Farmers Bank, whose system was outdated to operate.
Meanwhile, Farmers Bank's more advanced foreign exchange (Forex) system has helped elevate the merged bank's Forex business. Profit growth has been obvious, with earnings per share of NT$1.77 for the first 10 months of this year, making Taiwan Cooperative one of the most profitable banks in Taiwan.
TT: Have you seen any obvious changes in the staff's values?
Chen: I do not expect dramatic changes to happen overnight in their long-forged values. Improvements cannot last long without institutional changes, so we adjusted the payroll system and offer merit pay in order to motivate our employees.
Also, our managerial-level staff have been taking English courses during these two years to improve their linguistic skills and self confidence. This is also a way to beef up our level of internationalization.
Sometimes I feel like we're dragging a massive machine, but we can be the forerunner among state banks when it comes to restructuring. Every branch has a morning meeting to review and discuss daily performance, which has never happened before.
We created a task force to further improve how we manage our customer relationship management, and already we've seen improvements there.
TT: Standard Chartered Bank's acquisition of Hsinchu International Bank (
Chen: I always advocate a concept of "think global, wake-up local and act regional." Taiwanese banks have to awaken to the challenges and make adjustments in the structure of assets and personnel by analyzing the profit structure of their foreign rivals.
The introduction of foreign banks committed to long-term operation plans could lead to a healthy consolidation and competition in the local banking sector. South Korea's experience shows that the vulture-like private equity funds seeking quick returns through restructuring and redundancy may hurt Taiwan's banking sector and society as a whole.
TT: Do Taiwanese banks stand a chance if the government retains cross-strait restrictions on expansion?
Chen: Even if the government lifts the bans, I do not expect Chinese regulators to license all interested Taiwanese banks, which depends on a reciprocal approval of Chinese lenders on Taiwan's part. Only a limited number of local lenders can enjoy the fruits of a cross-strait opening, considering China's possible discretion in protecting Chinese banks from the immediate impact of competition.
TT: As a former deputy minister of finance and a former chairman of the Taiwan Stock Exchange, what recommendations would you make to the nation's capital markets?
Chen: Hong Kong is a serious rival whose stock market cap and turnover used to be smaller than that in Taiwan. Yet it has caught up.
As manyn as 38 China-based Taiwanese companies went for initial public offerings (IPO) in Hong Kong last year, to which we add Chinese and foreign firms, which was equivalent to the number of total IPO cases in the Taiwan Stock Exchange last year.
The Taiwanese stock market has dropped from second -- after Tokyo -- to fourth or fifth place from the second in Asia.
While I was chairman of the Taiwanese Stock Exchange, I used to promote partnership with the Singapore Stock Exchange, which did not work as our government thought Singapore was not friendly to Taiwan enough.
If the government cannot lift the bans and attract China-based Taiwanese firms to return to Taiwan any time soon, then I think we should cooperate with Hong Kong for co-listing or with other Asian stock exchanges and enable investors to trade in their respective countries.
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