It is a time to rethink but not to denounce.
The reference here is to what President Chen Shui-bian (陳水扁) called "a second stage financial reform" (二次金改) in which at least one local financial institution should be run by a foreign entity or have a majority foreign shareholder by the end of next year.
But the announcement by state-controlled Chang Hwa Commercial Bank (彰化銀行) on May 6 that it would indefinitely delay its planned global deposit receipt (GDR) issuance of 1.4 billion shares (because of differences between the bank and the interested bidders) has rippled through the nation's financial sector, with some people casting doubts on the government's determination in carrying through financial reform.
Critics said the failed GDR issuance not only raised concerns over the bank's difficulties in raising capital, but is also a lost opportunity for the government to engage experienced foreign strategic partners, if there are any, in revamping domestic banks with government ownership.
The idea of seeking foreign partnership is just one of the government's plans to help improve local banks' competitiveness.
The government also wants to increase the market share of three domestic banks to above 10 percent in terms of total assets. Other specific goals that Chen highlighted on Oct. 20 were halving the number of state-run financial institutions to six by the end of this year, and encouraging mergers and acquisitions to reduce the number of financial holding companies from 14 to seven by the end of next year.
With big tax incentives and accounting flexibility, local banks have made notable progress in resolving high non-performing loan (NPL) levels and strengthening their low loan-loss provision coverage. According to the Financial Supervisory Commission's latest statistics, the NPL ratio, including loans under surveillance, fell to 3.66 percent in March while the coverage ratio stood at 40.07 percent.
But these welcome developments are just the beginning. The government now needs to go further to see additional activity toward banking consolidation.
Therefore, the failure in Chang Hwa Bank's GDP issuance may not necessarily be viewed as a government setback on its mandate for banking consolidation, but it does pose an opportunity for the government to review its implementation strategy and even its reform mindset, before it is too late.
First of all, is the private buy-out through GDR issuance the only way that the government has to get rid of its shares in Chang Hwa Bank or in other state-controlled banks?
Some have suggested the successful experience at auction the Taipei City Government had in selling its ownership in TaipeiBank (
Secondly, is the government's reform plan focusing mainly on quantity instead of quality, and is such a plan leaving no room for smaller players in sharing the nation's financial resources?
In a competitive environment, financial groups with good integration of group resources will naturally earn more while adding pressure to mid- and small-size financial institutions to become part of strong groups in order to survive in the long term. But industry consolidation should not necessarily pose a problem for smaller players -- if the latter continue sharpening their competitive edges and act as "financial specialty stores" on their own.
Thirdly, it shouldn't matter who helps achieve the president's goal to improve the nation's financial sector, foreign or local financial institutions. But isn't it true that what the government should do is work to ensure that all players compete on a level playing field, while supervising these financial conglomerates to reinforce their corporate governance?
With its passing of Hong Kong’s new National Security Law, the People’s Republic of China (PRC) continues to tighten its noose on Hong Kong. Gone is the broken 1997 promise that Hong Kong would have free, democratic elections by 2017. Gone also is any semblance that the Chinese Communist Party (CCP) plays the long game. All the CCP had to do was hold the fort until 2047, when the “one country, two systems” framework would end and Hong Kong would rejoin the “motherland.” It would be a “demonstration-free” event. Instead, with the seemingly benevolent velvet glove off, the CCP has revealed its true iron
At the end of last month, Paraguayan Ambassador to Taiwan Marcial Bobadilla Guillen told a group of Chinese Nationalist Party (KMT) legislators that his president had decided to maintain diplomatic ties with Taiwan, despite pressure from the Chinese government and local businesses who would like to see a switch to Beijing. This followed the Paraguayan Senate earlier this year voting against a proposal to establish ties with China in exchange for medical supplies. This constituted a double rebuke of the Chinese Communist Party’s (CCP) diplomatic agenda in a six-month span from Taiwan’s only diplomatic ally in South America. Last year, Tuvalu rejected an
US President Donald Trump on Thursday issued executive orders barring Americans from conducting business with WeChat owner Tencent Holdings and ByteDance, the Beijing-based owner of popular video-sharing app TikTok. The orders are to take effect 45 days after they were signed, which is Sept. 20. The orders accuse WeChat of helping the Chinese Communist Party (CCP) review and remove content that it considers to be politically sensitive, and of using fabricated news to benefit itself. The White House has accused TikTok of collecting users’ information, location data and browsing histories, which could be used by the Chinese government, and pose
US President Donald Trump’s administration on Friday last week announced it would impose sanctions on the Xinjiang Production and Construction Corps, a vast paramilitary organization that is directly controlled by the Chinese Communist Party (CCP) and has been linked to human rights violations against Uighurs and other ethnic minorities in Xinjiang. The sanctions follow US travel bans against other Xinjiang officials and the passage of the US Hong Kong Autonomy Act, which authorizes targeted sanctions against mainland Chinese and Hong Kong officials, in response to Beijing’s imposition of national security legislation on the territory. The sanctions against the corps would be implemented