Wed, Mar 17, 2010 - Page 1 News List

FSC unveils rules for cross-strait financial sector

By Joyce Huang  /  STAFF REPORTER

The Financial Supervisory Commission (FSC) yesterday made public new regulations governing cross-strait market access for the banking, securities brokerage and insurance sectors, laying the groundwork for financial institutions on either side of the Taiwan Strait to enter each other’s market.

Among other things, future China-bound investments in the banking sector by Taiwanese financial institutions would be capped at NT$25 billion (US$784.7 million), while local financial service providers won’t be allowed to spend more than NT$50 billion taking stakes in Chinese banks.

In the banking sector, 14 domestic banks that meet the 10 percent bank for international settlements (BIS) ratio requirement will be qualified to set up representative offices in China, although 10 have already done so, Kuei Hsien-nung (桂先農), director-general of the commission’s banking bureau, told a media briefing yesterday.

Five domestic banks, including Cathay United Bank (國泰世華銀行) and Chinatrust Commercial Bank (中國信託銀行), which meet the 8 percent tier-one capital ratio with a bad-loan ratio of below 1.5 percent and a coverage ratio exceeding 100 percent, will be allowed to set up subsidiaries in China, he said.

Among the nation’s 15 financial holding companies, 13 that meet the requirements of a 10 percent BIS ratio with a capital adequacy ratio above 110 percent and a double leverage ratio of below 115 percent will be qualified to take a stake in a Chinese bank, he said.

Applications for China-bound investment in the banking sector, which must not exceed 15 percent of a bank’s net worth or 10 percent of its parent company’s net worth, however, will not be accepted until after a to-be-scheduled legislative session is completed, commission vice chairman Wu Tang-chieh (吳當傑) said.

Five Chinese banks — Bank of China (中國銀行), Industrial & Commercial Bank of China (中國工商銀行), China Construction Bank (中國建設銀行), Bank of Communications (交通銀行) and China Merchants Bank (招商銀行) — that are among the world’s top 1,000 largest banks and have operated in an OECD country for more than two years will soon be allowed to open representative offices in Taiwan, the regulations say.

Chinese banks that are among the world’s top 200 banks and have operated in an OECD country for more than five years will be allowed to open branches two years after their representative offices are opened. The government still does not allow Chinese banks to set up subsidiaries in Taiwan.

Chinese banks or financial service providers that are among the world’s 200 largest will be allowed to take a minority stake of up to 10 percent in local financial institutions, pending a relaxation of the rules on Chinese companies’ Taiwan-bound investments by the Ministry of Economic Affairs.

“We aim to open up the market in a progressive manner, so the 5 percent to 10 percent stake threshold is something that may gradually be relaxed,” Kuei said.

The Taiwan-bound investment implementation dates, however, are yet to be finalized, pending the progress of discussions on an economic cooperation framework agreement (ECFA), Wu said.

In the securities sector, Taiwanese securities brokerage firms would be allowed to invest up to 40 percent of their net worth in China, up from the current 20 percent, the new regulations say.

Chinese securities brokerage firms that have operated overseas outside Hong Kong and Macau for more than five years would be allowed to set up representative offices in Taiwan if they have been profitable for three consecutive years with a net worth per share higher than the share’s face value.

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