FSC Plans Easing Restrictions on Reinvestments by Domestic Banks

To encourage Taiwan's domestic banks to expand overseas operations, Financial Supervisory Commission (FSC) plans to ease restrictions on bank investments by raising the ceiling of such investment to 40% of net equity from the current 40% of paid-in capital.

FSC statistics show that the paid-in capital of all banks in Taiwan reached NT$1.54 trillion (US$51.33 billion) as of the end of June 2014, with net equity of  NT$2.75 trillion (US$91.67 billion).

The new policy allows the ceiling of reinvestment by all domestic banks to increase nearly NT$500 billion (US$16.67 billion), with 14 such banks to have additional fund exceeding NT$10 billion (US$333.33 million) each for reinvestment, including Bank of Taiwan (BOT), Mega International Commercial Bank, CTBC Bank, Taiwan Cooperative Bank, Cathay United Bank, Land Bank of Taiwan, First Bank, Hua Nan Bank, Shanghai Commercial & Savings Bank, Taipei Fubon Commercial Bank, E. Sun Bank, Bank SinoPac, Chang Hwa Bank, and Citibank (Taiwan).

BOT may see the highest increase of NT$72 billion (US$2.4 billion) in reinvestment capital, followed by Mega's NT$51.5 billion (US$1.72 billion) and CTBC's NT$38.4 billion (US$1.28 billion). The consensus is that the prospective increase in reinvestment capital would enhance Taiwanese banks' capacity for overseas mergers.

FSC also plans to relax limitations on investments by securities companies, with reports of FSC to likely lower the threshold of capital adequacy ratio of a securities firm to 150% from the existing 200% required upon a firm's application for oversea merger, with such lowering to possibly benefit 11 Taiwanese securities firms to set up footholds overseas.

Taiwan has 36 integrated securities firms who have capital adequacy ratio of over 200%, except one. Such move would allow Taiwan's brokerage firms more strength for overseas acquisitions. (JL)