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SCMP Reporter

Cathay United Bank, a subsidiary of Taiwan's largest financial group, is reportedly eyeing a stake in Fuzhou City Commercial Bank as the island prepares to lift its restrictions on investment on the mainland.
Herbert Liu, a banking expert at Taiwan's Tamkang University, made the prediction yesterday and said the investment in the Fujian-based lender could happen as early as this year.
Taiwan's Fubon Bank recently bought a stake in Xiamen City Commercial Bank, underscoring closer economic links between the island and the mainland.
'We will see more Taiwanese lenders succeeding in joining up with their mainland counterparts,' said Mr Liu, an instructor at the university. 'A second purchase of a mainland lender could happen as early as the end of this year.'
Fubon Bank (Hong Kong), the  listed arm of Taiwan's second-largest lender, gained approval in April to buy a 19.9 per cent stake in the Xiamen lender. It comes after years of negotiations, with Fubon establishing a representative office on the mainland in 2005.
Mr Liu said  more mainland lenders were also interested in buying stakes in their counterparts in Taiwan.
Industrial and Commercial Bank of China, the mainland's largest lender, and Bank of China, the third largest, were tipped to make their forays into the Taiwan banking industry, he said.
'The banking industry in Taiwan is overcrowded and there is a need to consolidate with either mainland or overseas players,' Mr Liu said.
Some  cross-strait  economic agreements have been signed since Beijing-friendly Ma Ying-jeou became president.
The Taiwanese financial industry has faced strict controls over mainland investment.
Lenders were prohibited from directly investing on the mainland, meaning they had to invest  via offshore subsidiaries.
By setting up a Hong Kong subsidiary, a Taiwanese lender could benefit from the city's closer economic partnership arrangement  framework, which offered lower minimum asset requirements set out by the mainland banking regulator.
'Acquisition is the quickest way to establish a foothold on the mainland,' said Mr Liu.
'Fubon's case sets the scene for its Taiwanese peers.'
Mainland banking regulations stipulate 25 per cent is the maximum stake that a domestic lender can sell to foreign financial institutions.
A single overseas investor can buy up to 20 per cent in a Chinese bank.
While Beijing has started to allow Taiwan banks to extend their footprint in the world's fourth-largest economy, Mr Liu said Hong Kong's strategic role as the springboard to the mainland would not be diminished.
'It will take at least one to two years before there is considerable change in the market landscape,' he added.
Banking breakthrough
Fubon Bank, after years of negotiations, acquired a stake in Xiamen city bank of: 19.9%



Cathay United eyes stake in mainland's Fuzhou city lender