Taiwan Banking Industry

Paper Summary:

The paper takes an in-depth look at the factors that have affected the Taiwanese banking industry and help to shape and mold it into the 'tiger' it is today. According to the paper, Taiwan has a dynamic capitalist economy that is gradually requiring decreased guidance on investment and foreign trade from the national government. The paper discusses how in time, government-owned banks and industrial companies became privatized, mainly as a result of the export industry.

From the Paper:

"Taking control for Asian buyout investors did not only extend the lives of failing companies but also realized a high level of profits in the first half of 2005 (AltAssets 2005).In the first six months, divestments earned US$13.5 billion, 71% of which came out of "control" deals. There were, however, problems confronted by buyout investors. Buying out was a strange concept to Asian companies, which would not cede control of their business to foreign institutions. An exception is South Korea, where foreign-led buyouts proved successful early in the experimental stage and accounted for the turn-around of its economic crisis at the end of the last decade. It was, however, a different situation in Taiwan. The Taiwan banking sector was always an attraction to foreign buyout investors because of its combined assets at approximately US$750 billion, one of the largest in Asia. It was largely government-controlled, overcrowded and fragmented. The government claimed 50-60% ownership of the assets of these 48 banks. None of them had a market share of more than 10% and was, therefore, not a major player in the island or the region. Yet the government was willing to introduce foreign and local investors to hasten the consolidation of the industry. In May that year, Taiwan's Financial Supervisory Commission revised the rules, which would allow foreign financial companies to take full ownership of domestic banks. After selling 20% equity state of Changhwa Commercial Bank to the local Tashin Financial Holdings, the government privatized its holdings in Taiwan Business Bank, the 9th largest by assets. Taiwan Business Bank was far behind Hong Kong's Hang Seng Bank and Singapore's DBS Bank. Unlike the Changhwa Bank, which attracted foreign investors, such as Japan's Shinsei Bank and The Carlyle Group, Taiwan Business Bank attracted three local financial groups, such as E. Sun Financial Holding Company, Mega Financial Holding Company and Fubon Financial Holding in the government sale of its 43% holdings. It was a frustration to the Ministry of Finance and half of its almost 5,000 employees expressed deep apprehension towards the sale and went on strike in order to demand better benefits for themselves. The bank's business chairman resigned 10 days later, apparently because of his inability to introduced changes. The failure of takeover in the Taiwan Business Bank sent clear and powerful resistance from vested parties who saw that their interests were under threat. But the government would not give up despite this failure. It rallied by inviting bids for a majority state of China Shipbuilding Corporation, the island's largest shipbuilding company, and kept its hopes high that the move would prosper (AltAssets)."

Sample of Sources Used:

• AltAssets. To Control or Not to Be Controlled. Almeida Capital's Research Division, 2005. http://www.altasets.net/features/arc/200/nz7594.php
• Central Intelligence Agency. Taiwan. The World Factbook, 2006. http://www.cia.gov/publications/factbook/geos/tw.html
• Chow, Peter Y. Governance in Korea and Taiwan After 1997: Toward Sustainable Development in East Asia. The Newly Emerging Asian order and the Korean Peninsula, 2005. http://www.keia.com/2-Publications/2-3-monograph/Monograph2005/Chow.pdf
• Ho, Jenny. Financial Sector Urged to Outsource More Work. Taipe Times: The Taipei Times, 2004. http://www.taipeitimes.com/news/biz/achives/2004/05/19/2003156148
• Kovac, Matt. Taking On Taiwan's Banks. Business Week: The McGraw-Hill Companies, Inc., 2004. http://www.businessweek.com/magazine/content/04_38/63900/49_mz03.htm

More papers on Taiwan Banking Industry:

• Research Paper # 69098 : "The Pakistani Banking Industry"
• Research Paper # 60727 : "The Banking Industry in Oman"
• Term Paper # 117792 : "Tigers, Miracles, and the Mythology of Development"

APA Citation:

MLA Citation: