Financial Supervisory Commission Chairman William Tseng (曾銘宗) said on Thursday that several measures aimed at helping local banks become strong regional players had won the Cabinet’s support. Tseng said the commission wants to help at least two banks become leading financial institutions in Asia in three to five years, and the main points of the commission’s measures include increasing international supervisory cooperation, further deregulation, cultivating international financial professionals and establishing a database to facilitate overseas expansion.
In order to improve domestic banks’ competitiveness, Tseng said the commission will join with the Ministry of Finance to study ways to improve operations at state-owned banks and encourage banks to seek merger opportunities. The commission also plans to train 1,500 professionals each year to help banks to reach out to foreign markets.
In a nutshell, the commission hopes Taiwanese banks can pursue growth in overseas markets, albeit at increased risks, as they need to seek new areas to expand earnings because these banks are unlikely to improve their mediocre profitability due to the saturated and overcrowded domestic market.
However, one should not pay too much heed to what Tseng said because details of the commission’s measures are not available and there are no carrot-and-stick designs, such as tax breaks and new business approvals, to motivate the sector to meet the government’s goals. Moreover, the government still faces great challenges in pushing for bank mergers, especially state-run ones, as this task involves laying off employees and shutting down redundant branches — unwelcome moves during election years. Therefore, there is no guarantee the commission’s promises will be kept.
However, Tseng is not the first commission head to spell out policy goals aimed at turning local banks into key regional players. Former chairman Kong Jaw-sheng (龔照勝) said in 2004 that the government wanted to develop three domestic financial institutions into regional players in the Asia-Pacific market, while other former chairmen since Kong also supported industry consolidation to enhance the local sector’s global competitiveness. However there are no signs of progress toward this end a decade after Kong first pitched the plan.
Tseng has shown he is more reform-oriented than his predecessor, Chen Yuh-chang (陳裕璋), since he was appointed chairman in August by Premier Jiang Yi-huah (江宜樺). In the past few months, he has announced some measures to facilitate financial firms’ investment locally and abroad. His performance has been viewed positively by the market on expectations of a more proactive push on financial reforms, which Chen failed to implement because he had been too conservative about relaxing financial policies, focusing more on preventing corruption.
Even so, chairing the commission demands Tseng take a more bold move to enact substantial changes in financial laws, and he needs to be equally determined and flexible in implementing new policies while helping the sector cope with the fast-changing landscape. Most importantly, as market forces will naturally lead some well-equipped banks to stand out among their peers and to compete with their regional rivals, Tseng must realize that what the commission should do is to ensure that those market forces prevail.
The commission has correctly pointed out the direction local banks should move toward, but it must do better than this. The public want to see the government serve as a facilitator, not an obstacle.