The government's goal to clean up the banking system got a big boost yesterday after the legislature approved the much-sought after Financial Institutions Merger Law.
Minister of Finance Yen Ching-chang (
The new law also allows troubled banks to sell their problem loans to asset management companies before merging with stronger counterparts.
Lawmakers hailed the passage of the bill as a major victory for the government's goal to restructure the system. KMT legislator Chu Li-lun (
While the overdue loan ratio has officially reached a record high 6.5 percent, or NT$1 trillion, unofficial estimates put it at two or three times that figure.
Taiwan Ratings (
It is little wonder then that officials have long pushed for mergers to clean up the overburdened system. The number of banks has increased from 17 in 1991 to 48 at present, while the number of bank branches has gone up from 756 branches to 2,408 during the same period.
"What we are trying to do through this law is increase the incentives and reduce the obstacles for financial institutions," said Vice Minister of Finance Sean Chen (
But the relative strength of the financial institutions -- thanks to a strong economy -- have given them an excuse to delay their consolidation.
Analysts, however, expect to see some merger activities in the next 12 months, assuming the economy continues its downward descent and non-performing loans continue to rise.
"I would expect to see something by the second half of next year," said Patrick Pang, an analyst who covers Taiwanese banks for Lehman Brothers.
Analysts believe that many international banks -- such as Standard Chartered, Chase Manhattan, and HSBC -- may be interested in snapping up domestic banks at fire-sale prices.
Foreign banks are only willing to buy at a steep discount, analysts say, though actual pricing will be determined by the quality of assets and their operational strength.
Indeed, observers believe the new law may reduce the number of banks in Taiwan, though some say it may require "a mini-banking crisis" to accelerate the reform measures. "It usually wakes up the management," says Lehman's Pang.
Michael Ding (
To clean up the bad loans, the government, meanwhile, has said it will encourage domestic financial institutions to set up asset management companies with foreign banks.
Chinatrust Bank President Jeffrey Koo Jr (
Koo, however, said that while setting up asset management corporations may be easy, making them work would be a far more difficult task.
HONG KONG SECURITY: The president blasted regulations requiring Taiwanese agents or political organizations to provide information on their Hong Kong-related activities President Tsai Ing-wen (蔡英文) yesterday warned of countermeasures should controversial Chinese national security legislation imposed on Hong Kong undermine or harm Taiwanese interests. Article 43 of the legislation empowers the Hong Kong Special Administrative Region to serve written notices to Taiwanese political organizations or individual agents to furnish information on their Hong Kong-related activities, including their personal particulars, finances, assets, expenditure and capital in the territory. Failure to comply or providing false or incomplete information can result in a fine of HK$100,000 (US$12,903) or imprisonment of six months or two years respectively. Tsai said that Taiwan would keep a close watch on how
PROBE LAUNCHED: An officer who served as a supervisor in the drill died in an apparent suicide after the accident, which was caused by unexpected waves Two marines who were on Friday injured in a military exercise in the waters off Kaohsiung passed away yesterday, Navy Command said. The marines — surnamed Tsai (蔡), 26, and a sergeant surnamed Chen (陳), 36 — were in a seven-member Marine Corps team that encountered rough seas during a simulated response to enemy forces landing on Taiwan. Their rubber craft overturned in waters off Taoziyuan (桃子園) beach in Zuoying District (左營), injuring four of the marines. They were rushed to hospital, where three of them — Tsai, Chen and a 34-year-old sergeant — were taken to an intensive care unit
MORAL COURAGE: The Ministry of Foreign Affairs urged the global community to face China’s intention to subdue Taiwan and reject such irrational requests The Ministry of Foreign Affairs yesterday strongly condemned the Chinese government for meddling with US officials’ interactions with Taiwan after FBI Director Christopher Wray revealed China’s efforts to discourage US officials from visiting Taiwan. The greatest long-term threat to the US’ information security and intellectual property, as well as its economic vitality, is China’s counterintelligence and economic espionage operations, Wray told a video event at the Hudson Institute in Washington. Beijing is engaged in a highly sophisticated and maligning foreign influence campaign, with methods that include bribery, blackmail and covert deals, he said. Giving an example, Wray said that when a US official
CAUTION: Taiwan had zero cases of death from food poisoning for six years until last year, when two people died after eating wildlife, an FDA official said The Food and Drug Administration (FDA) yesterday urged the public not to eat wildlife or unidentified wild plants, as they could be fatal, with nearly 7,000 people affected by food poisoning last year, including two deaths due to wildlife consumption. The number of food poisoning incidents increased by nearly 50 percent last year, from 398 cases involving 4,616 people in the previous year to 503 cases involving 6,944 people, FDA data showed. That figure was the second-highest in history, the FDA said, adding that the highest number was recorded in 1997, with 7,235 people. Among the 503 cases, 87 were food poisoning clusters