A National Level Financial Holding Company equals Disaster

A National Level Financial Holding Company equals Disaster
United Daily News editorial (Taipei, Taiwan, ROC)
A Translation
August 22, 2007

The Executive Yuan suddenly announced last week that it would merge the Bank of Taiwan, the Land Bank of Taiwan, and The Export-Import Bank of the Republic of China (EXIM), into a "Three in One" national level Taiwan financial holding company. The process would begin by the end of this year, and would be completed within three years. Global financial markets are still reverberating from the aftershocks of the US subprime market collapse. Yet the ruling DPP considers this the centerpiece of its resuscitated "Second Financial Reform" program. One really has to wonder "What were they thinking?" If this is merely talk, merely Chen Shui-bian desperately striving to leave himself a "legacy," or yet another ruling DPP election ploy, so be it. If it isn't, if they actually mean to implement it, it will be a national level disaster.

Global financial markets have been caught in the maelstrom caused by the US subprime mortgage crisis. Capital has dried up. The market has undergone wild swings. Investors have panicked. Liquidity has evaporated. Central bankers the world over have been forced to collectively intervene. The major markets are still shaking. Global assets are seeking new price levels. National governments are in full battle array. Yet the Executive Yuan announces an utterly irrelevant plan for a national level financial holding company. It merrily announces to the whole world its grand dreams, as if it were talking in its sleep. The Executive Yuan's timing is so inappropriate, it leaves one dumbfounded at the government's inability to evaluate its situation, and makes one doubt its crisis management skills.

Frankly speaking, the policy is unintelligible. According to the Executive Yuan, the "Three in One" national level financial holding company's capital assets will amount to 100 billion. Its banking assets will amount to 158.8 billion US. It will become the 89th largest bank in the world, surpassing even Singapore's largest bank. It will be the first multi-core financial holding company combining finance, enterprise finance, foreign exchange, negotiable securities, and insurance. But apart from trumpeting the large numbers and the wide range of services, the Executive Yuan hasn't offered any concrete and convincing justification for the merger, or explained how it would increase the nation's competitiveness. Just as the "Second Financial Reform" was subject to unrealistic time constraints, so the national level financial holding company plan lacks a comprehensive policy justification. It is a merger purely for the sake of a merger. It too will probably have its schedule cut in half. It too will probably share the same disastrous fate.

Besides being unintelligible, the policy is inconsistent. The Economic Development Advisory Conference researched this matter long ago. The Bank of Taiwan and the Land Bank of Taiwan should not be treated as policy tools, but should simply be privatized. Last year the Economic Development Advisory Conference suggested that there was no need for a national level financial holding company. The suggestion was not included in the text of the resolution in order to keep all options open. The Land Bank of Taiwan once commissioned Goldman Sachs to research the possible benefits of a merger with Bank of Taiwan. Goldman Sachs' conclusion was that it should privatize first. Although everyone has advised against such a merger, the Executive Yuan has persisted. This further underscores the fact that the national level financial holding company proposal is not endorsed by financial experts and would do nothing for the nation's competitiveness. Its only justification is to add a gold star to Chen Shui-bian's report card just before he steps down, or to light the fuse that will set off a war over financial reform.

If the establishment of national level financial holding company is nothing more than armchair strategizing by a ruling regime facing a difficult election, then one may as well play along with it. After all, forming a financial holding company is no easy matter. The worst fear is that the ruling regime, motivated by selfish political considerations, might actually force the three banks to merge before the end of the year. Once the proposal becomes an accomplished fact, that will mark the beginning of a disaster.

The inefficiency of state owned banks is legend. Leave aside financial innovation, market flexibility, and other demanding criteria. Just look at the "First Financial Reform," which forked over trillions in public funds to cover non-performing government loans. State owned banks have difficultly avoiding political influence. One can hardly expect the merger of the Bank of Taiwan, the Land Bank of Taiwan, and the Export-Import Bank of the Republic of China to result in more efficient management, and not merely because of inbreeding. Even more to be feared is that following the merger, the combined "Three in One" entity will become a sitting duck for behind-the-scenes manipulators. Not only will it attract political patronage, it will generate losses comparable to the "First Financial Reform." Taxpayers will get stuck with the bill, and this national level project will become a national level disaster.

A national level financial holding company may well bring about economic disaster. The efficient operation of a financial system is essential to economic development, and can be compared to the free flow of blood in the human body. If a national level financial holding company controlling nearly two tenths of Taiwan's savings could be efficiently managed, it would become a model for company management. If it can't, it will bring calamity down on the economy. It may be too early to say with certainty that a national level financial holding company will be a failure. But based on the Executive Yuan's "Three in One" principles that it will not cut staff, will not be privately operated, and will not be listed on the stock market, such a national level financial holding company not only won't fly, it will drag everyone down with it.

國家級金控是災難的開始
【聯合報╱社論】
2007.08.22 03:10 am

行政院上周突然宣布，要把台灣銀行、土地銀行及中國輸出入銀行「三合一」，成立國家級的台灣金控公司，而且限時今年底啟動、三年內完成。值此全球金融體系動盪不安之際，這項被視為二次金改重新上路的指標之作，顯得突兀且不知所云；若這只是為了成就陳水扁總統好大喜功的心態，或執政黨的另一選戰伎倆，說說就算了，自是幸事；因為，果若去做，那將是國家級災難的開始。

最近全球金融體系都籠罩在美國次級房貸風暴的狂風驟雨裡，資產泡沫遽破、市場暴起暴落、投資人慌不擇路、流動性全面退潮的考驗接踵而至，讓全球央行總裁的集體焦慮不幸成真，被迫聯手入市搶救。在各大市場驚魂未定、全球資產正尋求重新定價、各國政府莫不嚴陣以待的緊要關口，行政院卻不著邊際地宣布籌組國家級金控的政策，甚至陶陶然於將晉身全球百大的夢言囈語；這不只是時機上的不當與突兀，也讓人對政府的情勢辨識能力瞠目結舌，更不免懷疑其危機應變能力了。

坦率地說，這是一個不知所云的政策。依行政院所言，三合一後的國家級金控資本額一千億元，其銀行資產規模達一千五百八十八億美元，將躋身全球第八十九大，甚至超越新加坡第一大銀行，並將是首家同時擁有消費金融、企業金融、外匯、證券及保險等多核心業務的金控。但除了資產數字、業務項目相加的成果，行政院並沒有針對合併綜效、必要性及國家競爭力提升的實益，提出更具體、更有力的說明。一如二次金改的限時減半政策，國家級金控的設立也缺乏完整的政策論述，在為合併而合併之下，恐也將如限時減半一樣，落得一敗塗地的下場。

除了不知所云，這還是個前後不一的政策。經建會早就做過研究，將台銀、土銀列為不具政策性任務、應予民營化的對象；去年經續會也曾主張國家級金控無設立必要性，之後為保留彈性才未列入決議；土銀更曾委託美商高盛專案研究與台銀合併的效益，所獲結論也是民營化為先。然而，儘管眾人皆曰不宜，行政院還是執意推行，益發凸顯此一國家級金控的設立，無關專業與國家競爭力，而只是為了妝點陳水扁卸任時金改成績單的政治祭品，或點燃金改選戰話題的引信。

果若國家級金控的設立只是當政者面臨選舉將屆的紙上談兵，倒不妨隨它炒作罷了，畢竟一家金控的成形並非易事；怕就怕執政者基於一己政治私利考量，將三家公營銀行在年底前強行送作堆，一旦生米煮成熟飯，那才是一連串災難的開始。

公營銀行的經營效率向受詬病，不談金融創新、市場靈活性等積極面評價，僅看一次金改時動用上兆元公共資金打消政治特權貸款等不良債權的規模，就足以說明公營銀行經營難脫政治干擾的現實困境所在。台銀、土銀與輸銀的合併，不只是因近親繁殖，而難以期待新合體的經營體質提升；更可怕的是，三合一後的新合體提供了政治黑手更大的操控空間，不僅會吸附、製造更多的政治米蟲，且其所生損失也如一次金改，將由全民埋單，成為國家財政的災難。

國家級金控可能帶來的另一災難，是對經濟的傷害。學理上常以血液之於人體，比喻金融體系的運行效率對經濟發展的重要性，如果掌握台灣近二成存放款資源的國家級金控能夠以高效率經營，為市場建立優質金控應有的公司治理及行為典範，那自是經濟之福；反之，就是經濟之禍了。現在論斷國家級金控的成敗或言之過早，但依行政院所訂下的不裁員、不民營化、不上市等三合一原則，國家級金控恐怕不只成為跳不動的大象，還會把大家一起拖下水！