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FSC eyes pan-Asia expansion by deregulating financial sector

TAIPEI, Taiwan -- The Financial Supervisory Commission (FSC, 金管會) yesterday pledged to assist in the efforts of Taiwanese financial institutions in expanding toward other Asian markets abroad by easing a number of regulatory hurdles limiting the banking, insurance and securities brokerage industries.

Upcoming Banking Act Amendments

FSC Chairman Tseng Ming-chung (曾銘宗) on Wednesday listed five measures including two upcoming amendments to the Banking Act (銀行法) that would raise the limits on merger and acquisition in the banking sector from 40 percent of a company's authorized capital to 40 percent of a company's net worth. The FSC noted that as of the end of June, authorized capital and net worth figures for domestic banks was last tallied at NT$1.55 trillion and NT$2.75 trillion respectively. Following the change, the financial sector is expected to have an additional NT$480 billion available for merger and acquisition bids abroad.

The second banking act amendment is slated to augment domestic banks' capacity to initiate mergers and acquisitions of foreign counterparts by changing the classification scale of ownership stakes held by domestic banks in subsidiary firms abroad. Previously, FSC regulations dictate that ownership stakes exceeding 50 percent of overseas subsidiary firms owned by domestic banks will not be counted toward its investment limits of 40 percent of authorized capital. The FSC noted that this change is motivated by appeals from domestic banks who stated that regulatory hurdles imposed in Southeast Asian markets often prevent them from acquiring ownership stakes approaching 50 percent on subsidiary companies, and the lowering of the threshold is expected to augment the expansionary capacity of Taiwanese financial institutions.

FSC to Lower RBC Requirement for Insurance and Brokerage Industries

For the insurance sector, the FSC stated that it will lower Taiwan's risk-based capital requirement on overseas mergers and acquisitions from the current range of 59 to 67 percent, to the 20 to 25 percent range that is closer to figures stipulated by regulators in Japan, South Korea, Singapore and the U.S. The move is designed to free up more than NT$100 billion in capital for merger and acquisition initiatives across the domestic insurance sector.

While international acquisitions by domestic insurance companies are limited to 40 percent of the firm's net worth, the FSC stated that the restriction may be assessed and waived on a case-by-case basis for high performing financial institutions of well-repute.

For brokerage companies, the FSC acknowledge that the current 200 percent capital adequacy ratio requirement greatly hampers flexibility in utilization. The Securities and Futures Bureau stated that forthcoming reduction in capital adequacy ratio requirements will fall between the current 200 percent and the 120 percent proposed by brokerage companies.

Meanwhile, Tseng on Wednesday met with leaders from eight of Taiwan's most notable financial institutions, namely Cathay Financial Holdings (國泰金), CTBC Financial Holding (中信金), Yuanta Financial Holdings (元大金), Fubon Financial (富邦金), First Financial (第一金), Mega Financial Holdings, the Bank of Taiwan (台銀) and China Development Financial (開發金).

The commission's objective is to furnish the national team's players with the capability to compete in markets abroad, noted Tseng earlier this week.

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