1 / 15

Taiwanese Financial Reform

Taiwanese Financial Reform. Huang, Chia-Teng (Ken) Wu, Chia-Hsuan (Dominic). Agenda. Background on financial system in Taiwan Current economic environment and problem recognition Source of the problem— Lack of complete Financial regulation Conclusion. Background. First financial reform:

demetrius-glover
Télécharger la présentation

Taiwanese Financial Reform

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Taiwanese Financial Reform Huang, Chia-Teng (Ken) Wu, Chia-Hsuan (Dominic)

  2. Agenda • Background on financial system in Taiwan • Current economic environment and problem recognition • Source of the problem— Lack of complete Financial regulation • Conclusion

  3. Background First financial reform: • Before 1991, the majority of Taiwanese banks were government owned. • 18 private owned banks were established during the First Financial Reform in 1991. • In 2001, there were more than 447 financial institutions and 5,841 branches in the small island

  4. Background Over-banking over bad debt • The lack of government monitoring, Asia’s financial crisis, and market’s vicious competition result in over irrecoverable loans and credits. • Series bankruptcies.

  5. Background: Asian financial crisis • No debt/no deficit • Foreign exchange reserves • Fiscal policy: stable exchange rate in the beginning to defeat foreign investors (Ex: Soros). Let market adjust the exchange rate later on.

  6. Background: Two rates in Taiwan are always stable after the first financial reform and the Asian Crisis • Foreign exchange rate are stable • Commit suicide rate is stably increasing

  7. Background: Second financial reform in 2001 • Release government owned banks to public/release government holding shares of existing government banks to less than 20%. • Integrate over-existing financial institutions to financial holding corporations.

  8. Background: Advantages of financial holdings: • Reduce financial institutions • Prevent vicious competition • Reduce the over irrecoverable loans • Synergy and better service • Global competitive advantages • Increase government monitoring ability

  9. Financial Reform • 14 financial holding companies in total in 2002 • Net total capital over 333 billion U.S. dollars • Only the strongest seven financial holding companies were allowed to operate at the end of 2006 • Aiming to be able to compete against foreign companies entering the domestic financial market through WTO framework

  10. Problems of financial reform • Financial holding companies benefit from synergy (commercial banks, investment banks, insurance companies, securities/stocks brokers) • Efficient synergy of smaller companies was ignored by the government • To become the top seven, 14 financial holding companies would need to merge others or to be merged

  11. Issues in financial reform • Only short period of time was given for financial holding companies to complete merger process • Government manipulation in merger process, benefiting certain financial holding companies • Misallocation of public fortune

  12. Financial Holding Company Law • Established and became effective on November 1, 2001 for financial form • Major financial regulation for financial holding companies • FHC are only allowed to invest in new business and manage the invested ones • Total investment amount cannot exceed 15% of its own capital, and cannot hold more than 5% of the invested business.

  13. Problems of the Financial Holding Company Law • Only restricts financial holding companies, but not their subsidiaries • Possible cheating to cover their own losses by subsidiaries • Risky venture capital business are likely to harm the bank depositors

  14. Conclusion • By 2006, the total number of financial holding companies had to be reduced to seven • However, 14 financial holding companies still operating on the financial market • Government has lost control of the financial holding companies • Ineffective financial supervising system • Unfair dealing with certain financial holding companies by the government

More Related