Mainland China Banks Heading for Taiwan: Initial focus will be on trade finance

Date of Release: 2009/07/07

PwC Taiwan held a “Cross-Strait Banking Trends” press briefing yesterday (July 7) to explore one of the hottest topics in Taiwan lately – investment by mainland China-based corporations – and examine its impact on the financial industry at different levels such as markets, legal systems, and M&A trends. According Ross Yang, a partner in PwC Taiwan’s legal unit, the initial focus of mainland China-based banks is likely to be on the trade finance market following the opening up of cross-strait economic and trade relations. That is to say, mainland banks coming to Taiwan primarily see things from the perspective of providing supportive financial services to corporations. However, in contrast to Taiwan-based banks setting up branches on the mainland, which are required to have been operating for at least three years and be profitable for two consecutive years, mainland banks in Taiwan are under no such restrictions. Given these unequal conditions, Taiwanese banks on the mainland appear to be at a comparative disadvantage.

Another issue deserving attention is protecting personal information. There is currently no restriction against Taiwanese banks taking personal data offshore to use as they wish. In terms of personal information protection, this is a problem that has yet to be overcome. PwC’s Ross Yang also mentioned financial oversight: Although regulations on the two side are not far apart, an important issue worth exploring further involves the qualifications of managers and whether Taiwan should recognize the academic credentials and professional experience of mainland bank executives. Naturally, a major consideration for mainland banks coming to Taiwan will be to round out their presence in the Taiwan, Hong Kong and mainland markets, and whether it is due to accommodating policies or with an eye to Taiwan banks’ greater experience in developing financial products, Taiwan is certain to be an important market that mainland banks will not want to pass by.

To seize opportunities in the first wave of mainland banks in Taiwan, consider the types of business they are likely to develop

Richard Watanabe, a PwC partner specializing in the financial industry, said that from his frequent contacts with mainland banks, his understanding was that though they wanted to build name recognition in Taiwan within a short time, the local consumer banking market has long been saturated and they will have to make a lot of investments in their brands, so initially they are likely to concentrate their attention on the corporate financial market. In the longer term, however, they may also be eyeing the financial consulting and wealth management fields. Jason Liu, a senior manager in PwC’s financial consulting unit, believes that as far as product offerings is concerned, whether it’s banking, insurance or the securities industry, Taiwan has a lot of experience with products and services in these areas, especially corporate finance, securities financing and banking products. This sort of business know-how is one of the local banking industry’s main strengths.

Seeking market expansion possibilities through cross-strait collaboration

Taiwan’s bankers are looking for ways to respond to the approaching wave of Chinese banks. Ross Yang believes that the impact will not necessarily be that great. Moreover, there will be more and more large-scale bank financing deals because, looking at things now, mainland banks will not just be developing existing markets; they will also be working to expand the cross-strait financial market. They will be making the financial market bigger to the benefit of both sides, and if a level of mutual trust can be established across the strait, then opportunities for cooperation may well expand in the future to include international markets.

Looking at the role CPAs can play amidst a wave of cross-strait collaboration, PwC partner James Huang believes that when banks go looking for cross-strait partners, they will find the data preparation requirements to be quite tedious. For example, taking just financial supervisory statements, data must be compiled each year for various documents, beginning with the annual report and quarterly reports, and totaling about 300 in all. This will demand the expenditure of much time and manpower, for everything from developing information systems to financial planning for future operations. Relying on assistance from CPAs for data preparation can save corporations a great deal of time and effort.