Taiwan permits 20pc mainland Chinese stake in banks

Raised limit on financial institution ownership comes amid deeper cross-strait integration

PUBLISHED : Tuesday, 02 April, 2013, 12:00am
UPDATED : Tuesday, 02 April, 2013, 7:02am

Taiwan will let mainland lenders own up to 20 per cent of some financial institutions, raising the limit on ownership as cross-strait economic integration deepens.

A single mainland lender will be allowed to own as much as 20 per cent of a banking unit of a financial holding company, Taiwan's Financial Supervisory Commission (FSC) said in a statement.

The new cap will take effect as soon as possible, Kuei Hsien-Nung, director general of the FSC's banking bureau, said after China Banking Regulatory Commission chairman Shang Fulin met Chen Yuh-chang, Taiwan's top market regulator, in Taipei yesterday.

The increased scope for investment from the mainland coincides with President Xi Jinping's pledge to promote cross-strait exchange and better ties, and as the island's lenders seek greater profits outside of a saturated home market. A March report by Standard & Poor's said Taiwan's banking sector profitability is "mediocre" compared with its peers in Asia.

"Taiwan lenders anticipate attracting Chinese investment and are eying future expansion opportunities in China," Chuang Piyen, a Taipei-based banking analyst at Mega Securities, said before the announcement.

Mainland lenders will be allowed to take a 15 per cent stake in an unlisted bank or holding company and 10 per cent of a listed bank or holding company, from 5 per cent of Taiwan financial institutions, the FSC said.

The mainland will let its commercial banks invest in Taiwan stocks under the qualified domestic institutional investor, or QDII, programme. An agreement between the regulators signed yesterday will take effect within 60 days, the FSC said. Mainland Chinese banks are currently allowed to invest in securities markets in Hong Kong, Singapore, Britain, the US and Japan.

Taiwan lenders began taking yuan deposits on the island in February, as well as underwriting debt in yuan, after an agreement was signed last year allowing for yuan clearing in Taiwan.

Xi said in February that Communist Party leaders have a duty to seek peaceful reunification with Taiwan and pledged to uphold the one-China principle, the official Xinhua News Agency reported after a meeting between Xi and Kuomintang honorary chairman Lien Chan. On March 17, at the closing of this year's National People's Congress, Xi pledged to improve relations across the Taiwan Strait.

Taiwan's financial regulator in 2011 urged lenders to expand faster on the mainland as competition erodes returns at home. The lenders have the second-narrowest net margin in the Asia-Pacific region after Japan.

Taiwan Business Bank has received approval from the CBRC to set up an initial branch in Shanghai, bringing the number of Taiwan bank branches on the mainland to 11.