Identifier
Created
Classification
Origin
07TAIPEI1253
2007-06-05 09:10:00
UNCLASSIFIED
American Institute Taiwan, Taipei
Cable title:
Taiwan Lifts Ban on New Bank Branches
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UNCLAS SECTION 01 OF 02 TAIPEI 001253
SIPDIS
SIPDIS
STATE PLEASE PASS USTR
STATE FOR EAP/RSP/TC, EAP/EP
USTR FOR ALTBACH AND STRATFORD
USDOC FOR 3132/USFCS/OIO/EAP/WZARIT
TREASURY FOR OASIA/LMOGHTADER
TREASURY ALSO PASS TO FEDERAL RESERVE/BOARD OF
GOVERNORS, AND SAN FRANCISCO FRB/TERESA CURRAN AND NY FRB MARIA
BOLIS
E.O. 12958: N/A
TAGS: EINV EFIN ECON PINR TW
SUBJECT: Taiwan Lifts Ban on New Bank Branches
SUMMARY
-------
UNCLAS SECTION 01 OF 02 TAIPEI 001253
SIPDIS
SIPDIS
STATE PLEASE PASS USTR
STATE FOR EAP/RSP/TC, EAP/EP
USTR FOR ALTBACH AND STRATFORD
USDOC FOR 3132/USFCS/OIO/EAP/WZARIT
TREASURY FOR OASIA/LMOGHTADER
TREASURY ALSO PASS TO FEDERAL RESERVE/BOARD OF
GOVERNORS, AND SAN FRANCISCO FRB/TERESA CURRAN AND NY FRB MARIA
BOLIS
E.O. 12958: N/A
TAGS: EINV EFIN ECON PINR TW
SUBJECT: Taiwan Lifts Ban on New Bank Branches
SUMMARY
--------------
1. In May, Taiwan lifted a six-year ban on new bank branches.
Regulators imposed the ban in order to encourage bank consolidation.
The new policy permits banks to open new branches, but only if they
meet strict requirements. Most banks will still need to rely on
merger and acquisition (M&A) to expand. END SUMMARY.
Ban on New Branches Lifted
--------------
2. On May 11, the Financial Supervisory Commission (FSC) lifted a
ban on new bank branches that had been imposed in 2001. The ban was
designed to encourage banks to acquire insolvent banks and with it
their branches to expand their business. Under the ban, Taiwan
auctioned off four insolvent banks placed in receivership, including
three in 2004 and one in May 2007.
Strict Requirements
--------------
3. In place of the ban, FSC has now set stiff requirements for a
bank to establish a new branch: a minimum capital adequacy ratio of
10%, a maximum non-performing loan (NPL) ratio of 2%, a minimum bad
debt/reserve ratio of 50%, and a minimum 5% return on net worth over
the past three years. Eligible banks may not have losses or
regulatory violations over the past year, or any cumulative losses
at the end of the previous year.
4. In addition, FSC will give priority to banks which have assisted
resolution of insolvent financial institutions in the past and have
a record of lending to small and medium enterprises.
Small Quota
--------------
5. The FSC has also set an annual quota of ten new branches for the
entire banking community. An eligible bank may set up two branches
in a year, and the number may increase to three if the new branches
will be located in rural areas, or if the bank has assisted
regulators to resolve problem financial institutions in the past.
Limited Number of Eligible Banks
--------------
6. Only 11 of the 41 Taiwan banks currently meet the FSC
requirements. All 11 eligible banks submitted new branch
applications to the FSC during May this year. The eleven banks and
their ranking based on net worth follow:
--Bank of Taiwan (1)
--Mega International Commercial Bank (3)
--Land Bank of Taiwan (4)
--Taiwan Cooperative Bank (5)
--First Commercial Bank (6)
--Cathay United Bank (9)
--Taipei Fubon Commercial Bank (10)
--Shanghai Commercial Savings Bank (13)
--E. Sun Commercial Bank (14)
--Industrial Bank of Taiwan (17)
--Export-Import Bank of ROC (21)
Comment
--------------
7. The strict requirements and small quota on new branches will not
satisfy the expansion desire of large banks. M&A will still be the
TAIPEI 00001253 002 OF 002
main way for banks to expand.
YOUNG
SIPDIS
SIPDIS
STATE PLEASE PASS USTR
STATE FOR EAP/RSP/TC, EAP/EP
USTR FOR ALTBACH AND STRATFORD
USDOC FOR 3132/USFCS/OIO/EAP/WZARIT
TREASURY FOR OASIA/LMOGHTADER
TREASURY ALSO PASS TO FEDERAL RESERVE/BOARD OF
GOVERNORS, AND SAN FRANCISCO FRB/TERESA CURRAN AND NY FRB MARIA
BOLIS
E.O. 12958: N/A
TAGS: EINV EFIN ECON PINR TW
SUBJECT: Taiwan Lifts Ban on New Bank Branches
SUMMARY
--------------
1. In May, Taiwan lifted a six-year ban on new bank branches.
Regulators imposed the ban in order to encourage bank consolidation.
The new policy permits banks to open new branches, but only if they
meet strict requirements. Most banks will still need to rely on
merger and acquisition (M&A) to expand. END SUMMARY.
Ban on New Branches Lifted
--------------
2. On May 11, the Financial Supervisory Commission (FSC) lifted a
ban on new bank branches that had been imposed in 2001. The ban was
designed to encourage banks to acquire insolvent banks and with it
their branches to expand their business. Under the ban, Taiwan
auctioned off four insolvent banks placed in receivership, including
three in 2004 and one in May 2007.
Strict Requirements
--------------
3. In place of the ban, FSC has now set stiff requirements for a
bank to establish a new branch: a minimum capital adequacy ratio of
10%, a maximum non-performing loan (NPL) ratio of 2%, a minimum bad
debt/reserve ratio of 50%, and a minimum 5% return on net worth over
the past three years. Eligible banks may not have losses or
regulatory violations over the past year, or any cumulative losses
at the end of the previous year.
4. In addition, FSC will give priority to banks which have assisted
resolution of insolvent financial institutions in the past and have
a record of lending to small and medium enterprises.
Small Quota
--------------
5. The FSC has also set an annual quota of ten new branches for the
entire banking community. An eligible bank may set up two branches
in a year, and the number may increase to three if the new branches
will be located in rural areas, or if the bank has assisted
regulators to resolve problem financial institutions in the past.
Limited Number of Eligible Banks
--------------
6. Only 11 of the 41 Taiwan banks currently meet the FSC
requirements. All 11 eligible banks submitted new branch
applications to the FSC during May this year. The eleven banks and
their ranking based on net worth follow:
--Bank of Taiwan (1)
--Mega International Commercial Bank (3)
--Land Bank of Taiwan (4)
--Taiwan Cooperative Bank (5)
--First Commercial Bank (6)
--Cathay United Bank (9)
--Taipei Fubon Commercial Bank (10)
--Shanghai Commercial Savings Bank (13)
--E. Sun Commercial Bank (14)
--Industrial Bank of Taiwan (17)
--Export-Import Bank of ROC (21)
Comment
--------------
7. The strict requirements and small quota on new branches will not
satisfy the expansion desire of large banks. M&A will still be the
TAIPEI 00001253 002 OF 002
main way for banks to expand.
YOUNG