FSC unveils financial upgrade project

2015-05-14

An initiative aimed at strengthening the fundamentals of Taiwan’s financial institutions was introduced May 12 by the Financial Supervisory Commission, better preparing the local sector for intensified global competition.

“The project aims at reinventing the firms through 12 aspects of daily operations, including corporate social responsibility, financial structure, product design, profitability and risk management,” FSC Minister Tseng Ming-chung said.

According to Tseng, Taiwan’s banking and insurance companies posted record profits topping NT$500 billion (US$16.23 billion) last year. “Yet their business quality did not show corresponding improvement,” he said.

“Some of the earnings came from one-time transactions, or were not related to the firms’ ongoing operations and did not reflect core competitiveness.”

Under the initiative, firms will be encouraged to increase asset values and capital adequacy ratios so they can better tap other Asian markets.

Statistics shows Taiwan’s top five banks averaged a CAR of 12.85 percent, and the combined assets of the entire sector stood at NT$4.3 trillion. “Both numbers are below what is needed for expanded regional development,” Tseng said.

The project encourages bidding to achieve scale of economy. This is only possible if the acquiring party holds a 50 percent ownership stake and the interests of minority shareholders are protected, among other conditions.

Also, the government will introduce specific measures such as access to financial big data compiled by authorities to help local banks enhance their product development and risk control capabilities.

The FSC and related agencies will review existing regulations and developments abroad, as well as monitor local firms’ pricing policies to ensure market order, Tseng said.

“As the businesses grow, they must shoulder greater social responsibilities by contributing to charities and ensure more equitable profit distributions among employees, clients and shareholders.

“It is important to keep in mind that the initiative will not produce immediate benefits,” Tseng said, adding that some banks may even see their profitability drop during the implementation stage.

“In the long run, these efforts will pay off handsomely in the form of enhanced returns on assets and equity exceeding 1 percent and 15 percent, respectively.”

Source: Taiwan Today (http://taiwantoday.tw/ct.asp?xItem=230363&ctNode=413)