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Sat, Nov 24, 2001 - Page 18 News List

Plan for China branches of banks moves forward

By Stanley Chou  /  STAFF REPORTER

The Ministry of Finance is planning to allow banks in Taiwan to open branches or subsidiaries in China, the Chinese-language media reported yesterday.

The report said Minister of Finance Yen Ching-chang (顏慶章) briefed the Presidential Office on the plan earlier this week and the ministry is set to grant permits to banks to set up branches or subsidiaries in China soon -- as long as their operations won't affect their headquarters in Taiwan.

One market watcher voiced support for the move.

"If Taiwan's banking industry wants to increase its competitiveness, extending business to China is a must," James Huang (黃百業), vice president at Accenture Co, a US management consulting company with a branch in Taiwan told the Taipei Times yesterday.

"Since Taiwan is going to enter the WTO in the near term, competition from foreign banks will increase considerably [after the entry]. The government is working on a comprehensive strategy for the banking industry to increase its competitiveness. One way of doing this is to set up the Greater China area as the niche market for Taiwanese banking industry over the next few years, especially in the state-run banking and semi-privatized banking sector," Huang said.

However, the report also quoted Yen as saying that "before the banking industry is allowed to set up branches in China, the jurisdiction problem across the Strait on the supervision of the bank's branches would have to be solved first".

"Since China has not agreed to allow Taiwan's banking industry to conduct remninbi business in China, therefore Yen proposed setting up branches or subsidiaries in China, in order to prevent massive funds outflows from Taiwan," an unnamed official from the Presidential Office was quoted in local media reports as saying.

In early April, however, the Executive Yuan proposed allowing banks to set up representative offices in China, provided they met certain criteria.

Only the top 10 banks -- in terms of both asset value and net worth -- would be allowed to establish such offices, according to a proposal made by the finance ministry and the Mainland Affairs Council.

Among the criteria are that a bank's capital adequacy ratio must be above 8 percent, it already have an overseas representatives office or branch, it possess international banking expertise and it not have violated key banking laws and regulations in the last three years.

Banks' representative offices in China will be allowed to gather business information research and financial and banking information as well as develop correspondence channels.

Nine banks hve met the criteria set down by the ministry, including the Bank of Taiwan (台灣銀行), Taiwan Cooperative Bank (合作金庫), Hua Nan Commercial Bank (華南銀行), United World Chinese Commercial Bank (世華商銀), International Commercial Bank of China (中國商銀) and Chinatrust Commercial Bank (中國信託商銀).

Setting up representative offices is seen as just the first step toward the real goal of most of these banks -- establishing branches in China.

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