The planned merger between state-run Chang Hwa Commercial Bank and privately owned Taishin International Bank is in the spotlight again after new pushes by Chang Hwa’s executive directors. The government can no longer bury its head in the sand.
On Friday, Chang Hwa’s executive directors approved a plan to establish a seven-member committee that will conduct a feasibility study on the merger with Taishin International. This indicates that Taishin Financial Holding Co — which owns a 22.55 percent stake in Chang Hwa and is the parent company of Taishin International — has stepped up efforts to acquire Chang Hwa.
For Taishin Financial, the move is the right response to its shareholders’ demands. On June 21, at the company’s annual general meeting, shareholders demanded meaningful steps, and legal actions if necessary, to push for the merger after the plan languished for eight years.
In coming months, the committee is expected to present conclusions of its merger study — assessing the company’s funding sources, the means of share purchase, consolidated financial statements, a proposed timeframe for the merger and contingency measures if it fails to complete the takeover — before submitting the plan for approval to the two company boards, their respective shareholders and the nation’s financial regulator.
The response of the Ministry of Finance, Chang Hwa’s second-largest shareholder with a 20 percent stake, was yet another sad display of the government backing away from its policy of encouraging financial consolidation. The ministry also said on Friday it would request that other government agencies, including the Financial Supervisory Commission, keep a close watch over the case.
The ministry’s response is no surprise to anyone. While it admitted that it agreed to let Taishin Financial own the management rights to Chang Hwa in 2005, this did not mean it agreed to a merger of the two banks. Perhaps what the ministry actually consented to would have made little difference, because it has long viewed Taishin Financial’s move as a hostile takeover bid and is preoccupied with fears of the conglomerate exploiting a state-owned bank, raking in all the money it can and spending it at will.
Mergers among financial institutions remain a sensitive issue in Taiwan. However, there is no law that could prevent Taishin Financial from pursuing a merger of the two banks. Ironically, the company does risk violating current financial regulations that it cannot own two banks at the same time, so it is exigent that the company solve this issue. On the other hand, the ministry’s repeated opposition to the deal just suggests that it has no other strategy but to delay the deal as long as possible.
A better course of action is called for and it will be up to the Financial Supervisory Commission or even the judicial authorities to make a final ruling.
One could argue that Taishin Financial has nothing to lose in calling for transparent rules and an efficient system, along with a more level playing field, while the ministry has everything to lose.
Once the merger plan finally comes to the commission or the judicial authorities, it will be a test whether Taiwan can follow through on its promise to facilitate financial consolidation through mergers, or else display incompetence and irresponsibility.
The government cannot continue ignoring the long-delayed merger plan.
If the financial authorities cannot solve the issue in a timely and appropriate manner, the judicial authorities should get to the root of the problem and fix it, making the case for future collaboration between the private and public sectors. The loss of mutual trust is a critical issue facing Taiwan.