Recent reports that some small banks were either taken over by the government or acquired by foreign investors highlights the negative effects of weakness in those lenders' capital and liquidity as well as in their profitability and risk-taking capability.
Obviously, smaller and under-capitalized banks face more challenges as their stronger rivals are making the competition fiercer, whereas the industry as a whole is still fraught with the problems of fragmentation and interest-margin compression.
Some standalone or small banks that got into financial difficulties because of bad consumer debts have been trying hard to stay afloat. They have done so through improving asset quality and increasing diversification of revenues, as well as by focusing on fee income growth and enhancing risk management.
But the lack of significant progress has left them open to failure and such a failure, as Fitch Ratings warned last week, is very likely to weigh down the overall industry and make it vulnerable to a credit cycle downturn.
In an interview with Taiwanese media on Friday in New York, Financial Supervisory Commission (FSC) Chairman Hu Sheng-cheng (
Hu said there is concern about private equity funds' entry into the banking industry, but these funds could help the government's reform effort. His comments suggest that the government is welcoming the entry of private equity funds into the financial sector, despite concerns of the potential impact on local capital markets and financial stability.
In fact, the FSC has already shown a tendency to rely more on market-based solutions -- such as buyouts -- than the government's financial restructuring fund to bail out capital-strapped banks.
It started with Longreach Group's purchase of a 51 percent stake in EnTie Commercial Bank and ABN AMRO Bank's acquisition of Taitung Business Bank in June. Then the Carlyle Group agreed to buy a 36.9 percent share in Ta Chong Bank in July and SAC Private Capital Group and GE Money signed a memorandum of understanding with the Cosmos Bank on a capital injection last month.
As the commission has moved to facilitate the pace of industry consolidation by targeting small and under-capitalized banks, it should come as no surprise that some critics and bank staff dislike the trend toward foreign company acquisitions. They see such deals as the cheap sale of local assets to foreign investors. Given that some critics see private equity funds as vultures, they have demanded stringent regulatory requirements for foreign buyouts.
But the problem is that under-capitalized banks badly need fresh blood. Good or bad, the new breed of foreign investors do have their eyes on profits and they will bring in Western-style management and design a new business model to make returns within three to five years.
Foreign ownership should not be seen as evil, as long as the acquisitions were made through a transparent process and a level playing field.
But private equity firms' financing, which has long relied on cheap debt for high-return buyouts, will be an issue as bank loans to these funds have been curtailed due to US subprime mortgage problems. The FSC should pay attention to whether global credit woes will hit these funds and affect their financing of local acquisitions.
Saudi Arabian largesse is flooding Egypt’s cultural scene, but the reception is mixed. Some welcome new “cooperation” between two regional powerhouses, while others fear a hostile takeover by Riyadh. In Cairo, historically the cultural capital of the Arab world, Egyptian Minister of Culture Nevine al-Kilany recently hosted Saudi Arabian General Entertainment Authority chairman Turki al-Sheikh. The deep-pocketed al-Sheikh has emerged as a Medici-like patron for Egypt’s cultural elite, courted by Cairo’s top talent to produce a slew of forthcoming films. A new three-way agreement between al-Sheikh, Kilany and United Media Services — a multi-media conglomerate linked to state intelligence that owns much of
The US and other countries should take concrete steps to confront the threats from Beijing to avoid war, US Representative Mario Diaz-Balart said in an interview with Voice of America on March 13. The US should use “every diplomatic economic tool at our disposal to treat China as what it is... to avoid war,” Diaz-Balart said. Giving an example of what the US could do, he said that it has to be more aggressive in its military sales to Taiwan. Actions by cross-party US lawmakers in the past few years such as meeting with Taiwanese officials in Washington and Taipei, and
Denmark’s “one China” policy more and more resembles Beijing’s “one China” principle. At least, this is how things appear. In recent interactions with the Danish state, such as applying for residency permits, a Taiwanese’s nationality would be listed as “China.” That designation occurs for a Taiwanese student coming to Denmark or a Danish citizen arriving in Denmark with, for example, their Taiwanese partner. Details of this were published on Sunday in an article in the Danish daily Berlingske written by Alexander Sjoberg and Tobias Reinwald. The pretext for this new practice is that Denmark does not recognize Taiwan as a state under
The Republic of China (ROC) on Taiwan has no official diplomatic allies in the EU. With the exception of the Vatican, it has no official allies in Europe at all. This does not prevent the ROC — Taiwan — from having close relations with EU member states and other European countries. The exact nature of the relationship does bear revisiting, if only to clarify what is a very complicated and sensitive idea, the details of which leave considerable room for misunderstanding, misrepresentation and disagreement. Only this week, President Tsai Ing-wen (蔡英文) received members of the European Parliament’s Delegation for Relations