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Investors edgy as government talks up bank reforms

Vice Premier Wu Rong-i (吳榮義) yesterday reiterated the government's determination to continue with second-stage financial reforms despite waves of criticism and doubts about its legitimacy.

However, investors expressed less confidence as financial stocks continued to drop, shedding 1.4 percent yesterday compared with the 0.6 percent decrease of the weighted price index of the Taiwan Stock Exchange.

Wu's press conference was called after the stock market closed.

He said the banking sector was overcrowded and had to help nurture "national champions" that could compete with international financial institutions through consolidation.

The financial reform goals laid out by President Chen Shui-bian (陳水扁) late last year include halving the number of state-run banks to six by year's end, increasing the market share of three domestic banks to more than 10 percent each, and reducing the number of financial holding firms to seven from the current 14 by the end of next year.

Chen also hoped to encourage at least one domestic bank to list shares overseas or turn its management over to a foreign owner by next year.

Lawmakers have slammed the government's reform plan, arguing that it means to benefit certain private, family-run enterprises.

Selling state-run banks such as Taiwan Business Bank would help lower state-controlled lenders' market share to about 45 percent from 56 percent, Minister of Finance Lin Chuan (林全) said at the same briefing. He said there was no timetable to meet that target.

Presidential Office Secretary-General Yu Shyi-kun, speaking at another event yesterday, stressed that the reform goals were based on a consensus reached by politicians across the political spectrum and business representatives in 2001 to slash the government's stake in banks to less than 20 percent within five years.

"Taiwan's banking institutions must achieve economies of scale to survive global competition," Yu said, adding that the government was confident the reforms would be accomplished on schedule.
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