Government to fast-track Taiwan Financial

The government plans to expedite the merger of three state-owned banks to create a financial holding company, Premier Chang Chun-hsiung (張俊雄) said yesterday.

During the Cabinet's regular meeting yesterday morning, Chang said the Ministry of Finance would draft the plan to establish Taiwan Financial Holding Co (台灣金控) this year. The premier said the holding company was expected to become the nation's preeminent financial services provider, overtaking Cathay Financial Holding Co (國泰金控).

"We expect this new company will become the leading financial holding company in the country and help enhance the competitiveness of the nation's banking sector," Chang said.

Taiwan Financial Holding will be formed as a result of the merger of Bank of Taiwan (台灣銀行), Land Bank of Taiwan (台灣土地銀行) and the Export-Import Bank of the ROC (中國輸出入銀行).

The resulting holding company is expected to garner a local market share of at least 10 percent, Chang said. It will rank as the 18th-largest bank in Asia, he added.

The plan to form a new state-owned financial holding company is part of the government's effort to consolidate the sector to compete with foreign banks at home and abroad.

Deputy Minister of Finance Liu Teng-cheng (劉燈城) told reporters after the Cabinet meeting that Taiwan Financial Holding would have assets worth approximately US$158.8 billion, ranking it as the 89th financial holding company globally.

As of the end of March, Cathay Financial Holding's total assets were NT$3.53 trillion (US$107.03 billion).

The new holding company will be formed in three stages with the process, including the integration of the three banking units, expected to take two to three years, Liu said.

Taiwan Financial Holding will also comprise a securities company and a life insurance company, he added.

Liu did not say who would chair the new company. Sources at the ministry, however, suggested that Bank of Taiwan chairman Tsai Jer-shyong (蔡哲雄) may be asked to see Taiwan Financial Holding through the teething stage. The 62-year-old Tsai is a former chairman of Land Bank.

The three banks which will comprise the new holding company aren't publicly traded and Liu said the ministry has no plans to list Taiwan Financial Holding on the local bourse.

Bank of Taiwan is the largest local bank with 179 branches, enjoying strong financial support from the government. Land Bank is also a policy lender with a network of 156 branches, the financial regulator's data shows.

Last month, Bank of Taiwan acquired another state-run firm, Central Trust of China (中央信託局). That deal is expected to have a limited impact on its financial profile, Fitch Ratings said on Aug. 8.

"The establishment of the state-run financial holding company will not affect the nation's banking industry in the short-term," Susan Chu (朱素徵), a director at Taiwan Ratings Corp (中華信評) said by telephone yesterday.

In creating the new holding company, the government said it would use Mega Financial Holding Co (兆豐金控) as a model.

However, Chu said Mega Financial's performance after the merger with state-controlled Chiao Tung Bank (交通銀行) and International Commercial Bank of China (中國國際商銀) in August last year had not been impressive.

The merger of state-owned banks usually meets with strong opposition from labor unions, Chu said, adding this meant a reduction in personnel was not likely.