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?
Could Asia be on the verge of a new wave of nuclear proliferation? A look back at the early history of the North Atlantic Treaty Organization (NATO), which recently celebrated its 75th anniversary, illuminates some reasons for concern in the Indo-Pacific today. US Secretary of Defense Lloyd Austin recently described NATO as “the most powerful and successful alliance in history,” but the organization’s early years were not without challenges. At its inception, the signing of the North Atlantic Treaty marked a sea change in American strategic thinking. The United States had been intent on withdrawing from Europe in the years following
My wife and I spent the week in the interior of Taiwan where Shuyuan spent her childhood. In that town there is a street that functions as an open farmer’s market. Walk along that street, as Shuyuan did yesterday, and it is next to impossible to come home empty-handed. Some mangoes that looked vaguely like others we had seen around here ended up on our table. Shuyuan told how she had bought them from a little old farmer woman from the countryside who said the mangoes were from a very old tree she had on her property. The big surprise
The issue of China’s overcapacity has drawn greater global attention recently, with US Secretary of the Treasury Janet Yellen urging Beijing to address its excess production in key industries during her visit to China last week. Meanwhile in Brussels, European Commission President Ursula von der Leyen last week said that Europe must have a tough talk with China on its perceived overcapacity and unfair trade practices. The remarks by Yellen and Von der Leyen come as China’s economy is undergoing a painful transition. Beijing is trying to steer the world’s second-largest economy out of a COVID-19 slump, the property crisis and
Former president Ma Ying-jeou’s (馬英九) trip to China provides a pertinent reminder of why Taiwanese protested so vociferously against attempts to force through the cross-strait service trade agreement in 2014 and why, since Ma’s presidential election win in 2012, they have not voted in another Chinese Nationalist Party (KMT) candidate. While the nation narrowly avoided tragedy — the treaty would have put Taiwan on the path toward the demobilization of its democracy, which Courtney Donovan Smith wrote about in the Taipei Times in “With the Sunflower movement Taiwan dodged a bullet” — Ma’s political swansong in China, which included fawning dithyrambs