With the Economic Cooperation Framework Agreement (ECFA) having taken effect yesterday, China might announce approval for a first group of Taiwanese banks to set up branches in China as early as next month, banking industry officials said.
“‘The sooner we can open for business in China, the earlier we can profit’ has become a slogan for Taiwan’s banking institutions,” an official said on Saturday.
Banking industry officials said most Taiwanese banks are putting a lot of effort into launching trade financing and working capital financing for Taiwanese businesses in China, trying to expand their lending base.
ACTION PLAN
First Financial Holding Co (第一金控) chairman Joseph Tsai (蔡慶年) said the Taiwanese banking industry should first focus on developing the financing business for small and medium-sized Taiwanese companies currently operating in China.
Tsai said the next phase should involve developing wealth management business for local Taiwanese businessmen and asset-rich customers.
He also said that Taiwanese banks should consider setting up branches in the Chinese cities of Chongqing, Chengdu, Dalian and Shenyang to cultivate the markets there.
Taiwanese banks that have been given permission by the Financial Supervisory Commission to upgrade their representative offices in China to branches include Hua Nan Commercial Bank (華南銀行), First Commercial Bank (第一銀行), Taiwan Cooperative Bank (合作金庫銀行), Chang Hwa Commercial Bank (彰化銀行), Cathay United Bank (國泰世華銀行) and Land Bank of Taiwan (土地銀行).
The banks are currently awaiting approval from China’s banking regulatory commission to establish branches.
PROCESS
According to the ECFA’s “early harvest” program, Taiwanese banks can upgrade their representative offices in China to branches one year after being set up, and the branches can begin offering yuan-denominated banking services after two years of operations if profits have been registered for the second year.
However, any Taiwanese bank branch which registers profit within one year of operation in China can offer yuan-denominated banking services, but only for China-based Taiwanese businesses.
These are seen as major Chinese concessions under the ECFA because other foreign banks have to wait at least five years before they are allowed to offer yuan-denominated banking services.
INTEREST
However, other Taiwanese banks — ones that have not been able to enter the China market in the first group — are also trying to use a variety of means to initiate cooperation with Chinese banks.
SinoPac Holdings Co (永豐金控) and its banking and security subsidiaries have signed a memorandum of understanding, or an alliance agreement, with its Chinese counterparts, while Taishin Financial Holding Co (台新金控) also announced last week that it will sign a letter of intent with Nanjing Zijin Investment Co (南京紫金).
Far Eastern International Bank (遠東商銀) is planning to sign a letter of intent with Bank of Chongqing (重慶銀行) and is expected to become one of the first Taiwanese banks to develop business in a so-called “green channel” region in southwestern China.
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