Taipei Times: Taiwan’s financial market is overcrowded and fragmented. How will Bank of China set itself apart from competitors here?
Li Lihui (李禮輝): There will be both competition and cooperation between Bank of China and Taiwanese peers. We have forged cooperation ties with 29 Taiwanese banks to provide better services for Taiwanese firms in China.
Our Taipei branch will focus on corporate banking, providing deposits and loans, bills financing, underwriting corporate debt issuance, investment in financial assets and corporate bonds, among other businesses.
As for consumer banking, there are a few restrictions, including the minimum requirement of NT$3 million (US$100,700) in deposit. We would like to learn from local peers in this segment because they are more experienced in retail banking and have better knowhow in personnel management, product and technology innovations.
On the other hand, we have a large network in China and globally. We can help Taiwanese firms facilitate expansions in China.
TT: Will China’s recent interest rate cuts affect your bank’s earnings? How does it hold up amid worsening credit quality in China?
Li: China’s central bank lowered benchmark interest rates on loans and deposits by 0.25 percentage points last month. The monetary policy came in response to current macroeconomic conditions.
What is more important, the People’s Bank of China [China’s central bank] allows deposit rates to float higher and lending rates to float lower by a wider range. The adjustment is a big leap toward marketization of interest rates in China.
Surely, the rate adjustments will have some negative impact on net interest margin and interest income for all Chinese lenders. However, we can minimize the impact by restructuring our loan book, credit and customer profile and risk pricing policy.
In fact, Bank of China outperforms Chinese peers in terms of marketization. Overseas operations, which account for 23 percent of our total assets, are fully exposed to marketization and so are our foreign currency, bond and securities businesses.
It is true there are some delayed debt repayments this year, but they account for a tiny share of overall loans. Our bad loan ratio hovers at about 1 percent, a safe level by international standards.
We will step up risk control and pay close attention to public financing, real-estate lending and firms with oversupply concerns. So far, the issue does not pose a problem for Bank of China.
TT: Did you meet with Taiwan’s financial officials for talks over the yuan settlement issue during your current visit?
Li: We keep close in contact with the central bank and the Financial Supervisory Commission. Recently, I met with officials from the two agencies for discussions on business development plans. As a commercial bank, Bank of China hopes the two sides can further open their banking markets. We hope bilateral authorities can soon work out a mechanism for currency settlements.
TT: You promise Bank of China will provide Taiwanese firms with more than 200 billion yuan [US$31.48 billion] in bank loans. Is the money part of the 600 billion yuan bank loan the Taiwan Affairs Office under China’s State Council announced days earlier to ease cash demand among Taiwanese firms over the next four years?
Li: It is part of the lending program as announced by the Taiwan Affairs Office. We aim to provide no less than 200 billion yuan in the following three years.
With more and more Taiwanese firms setting up operations in China, many are in need of bank loans and other financial services. We will try our best to meet their needs, be it trade financing, supply chain financing and cross-border business and currency settlement services.
There are premises for the loans, though. We will provide services to Taiwanese firms that can advance China’s development plans and meet lending criteria. Our Taipei branch will make closer contacts with those firms’ headquarters in Taiwan to gain better understanding of their needs and operations. This way, Bank of China can better mobilize its global resources to help those firms strengthen operations in China and worldwide.
TT: Would you talk more about cross-strait currency settlement?
Li: It is up to authorities on both sides to work out the settlement mechanism. However, Bank of China is the world’s largest provider in terms of cross-border yuan settlements. For the first five months of this year, cross-border yuan settlements totaled 830 billion yuan. We are the main yuan settlement bank in Hong Kong, Macau and Malaysia. We hope to extend the services to Taipei once the settlement rules are in place.
The yuan settlement mechanism will benefit Taiwanese firms the most because they can save a significant amount of foreign exchange costs and better control foreign exchange risks. Cross-strait trade totaled US$160 billion last year, with Taiwan’s trade surplus totaling US$89.8 billion.
DIVIDED VIEWS: Although the Fed agreed on holding rates steady, some officials see no rate cuts for this year, while 10 policymakers foresee two or more cuts There are a lot of unknowns about the outlook for the economy and interest rates, but US Federal Reserve Chair Jerome Powell signaled at least one thing seems certain: Higher prices are coming. Fed policymakers voted unanimously to hold interest rates steady at a range of 4.25 percent to 4.50 percent for a fourth straight meeting on Wednesday, as they await clarity on whether tariffs would leave a one-time or more lasting mark on inflation. Powell said it is still unclear how much of the bill would fall on the shoulders of consumers, but he expects to learn more about tariffs
Meta Platforms Inc offered US$100 million bonuses to OpenAI employees in an unsuccessful bid to poach the ChatGPT maker’s talent and strengthen its own generative artificial intelligence (AI) teams, OpenAI CEO Sam Altman has said. Facebook’s parent company — a competitor of OpenAI — also offered “giant” annual salaries exceeding US$100 million to OpenAI staffers, Altman said in an interview on the Uncapped with Jack Altman podcast released on Tuesday. “It is crazy,” Sam Altman told his brother Jack in the interview. “I’m really happy that at least so far none of our best people have decided to take them
PLANS: MSI is also planning to upgrade its service center in the Netherlands Micro-Star International Co (MSI, 微星) yesterday said it plans to set up a server assembly line at its Poland service center this year at the earliest. The computer and peripherals manufacturer expects that the new server assembly line would shorten transportation times in shipments to European countries, a company spokesperson told the Taipei Times by telephone. MSI manufactures motherboards, graphics cards, notebook computers, servers, optical storage devices and communication devices. The company operates plants in Taiwan and China, and runs a global network of service centers. The company is also considering upgrading its service center in the Netherlands into a
NOT JUSTIFIED: The bank’s governor said there would only be a rate cut if inflation falls below 1.5% and economic conditions deteriorate, which have not been detected The central bank yesterday kept its key interest rates unchanged for a fifth consecutive quarter, aligning with market expectations, while slightly lowering its inflation outlook amid signs of cooling price pressures. The move came after the US Federal Reserve held rates steady overnight, despite pressure from US President Donald Trump to cut borrowing costs. Central bank board members unanimously voted to maintain the discount rate at 2 percent, the secured loan rate at 2.375 percent and the overnight lending rate at 4.25 percent. “We consider the policy decision appropriate, although it suggests tightening leaning after factoring in slackening inflation and stable GDP growth,”
RSS