The Cabinet has finalized its review of a draft law that will pave the way for "one-stop shopping" bank services.
Analysts say the Financial Holding Company Law (
The draft, likely to be passed this month during the current session of the Legislative Yuan, would also help make financial institutions more transparent and streamline the complex maze of cross-shareholdings within business groups.
Chung Ching (
The draft allows financial institutions to become financial holding companies -- or financial supermarkets, including equity-swaps and other steps.
The draft also provides tax-incentives to propel the changes and reduce the costs of the streamlining.
In order to minimize the impact of the changes, the draft stipulates that applicants should apply to become financial holding companies from the Ministry of Finance (財政部) within nine months after the passage of the financial holding company law by the Legislative Yuan.
If the applicant fails to get approval from the ministry, the draft also stipulates that the authority would give the applicant a five-year adjustment period to meet the requirements of the draft.
Furthermore, upon approval from the ministry, applications would receive two extensions for the adjustment period, with each extension limited to two years.
Dozens of domestic financial groups have expressed an interest in setting up financial holding companies. A number of them have launched their own internal efforts toward setting one up.
cooperatives
In related financial news, Minister of Finance Yen Ching-chang (
"The merger between the Taiwan Cooperative Bank (合作金庫) and the Chinfon Commercial Bank (慶豐商銀), and the case among the First Commercial Bank (第一銀行), the Pan Asia Bank (泛亞商銀) and the Da An Commercial Bank (大安商銀) have been included in the ten merger cases," Yen said. "At the end of this year, we will see a completely different financial sector."
Yen also called for support of the formation of a Resolution Trust Company (RTC) in the Legislative Yuan while meeting with members of its Finance Committee.
"If we do not deal with the problems in the credit cooperatives, we would be facing NT$10 billion of losses every year," Yen warned. "The ministry would like to solve the problem as soon as possible."
"We need a NT$50 billion budget to establish an RTC in the preliminary stage," Yen told legislators. "Since the problematic credit cooperatives have to pay interest to their depositors and employees every day, under the current situation their revenue is less than their income. We estimate if we do not solve the problem, it will cost NT$10 billion more every year. Therefore it's a must to set up an RTC.
"Since total deposits in the entire banking sector has exceeded the ceiling of the Central Depository Insurance Company's (中央存保) coverage, some percentage of defaults within financial institutions could not be compensated through [the central] insurance mechanism, raising serious public concern. It is therefore necessary that the government raise the necessary money and set up the RTC to dispose of problematic financial institutions."
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