State Owned Bank Mergers Must be Privatized

State Owned Bank Mergers Must be Privatized
China Times editorial (Taipei, Taiwan, Republic of China)
A Translation
March 6, 2014

Summary: The FSC wants to create model regional banks. It wants to give Taiwan's financial industry the opportunity to emerge from the doldrums and to achieve prosperity. We support the Cabinet and the FSC in their effort to promote mergers and restructuring of state owned banks.

Full text below:

Over the next 30 years, the Asian economy will flourish. Our own state owned banks must seize these growth opportunities. They must move as quickly as possible. The government is determined to promote the merger of state owned banks. Recently three financial heavyweights, including the Minister of Finance, the Chairman of the FSC, and the President of the Central Bank, urged Premier Chiang to promote the consolidation of Asian regional banks and shares for state owned financial institutions. Premier Chiang gave his blessing. The responsible agencies will take action. Mergers of state owned banks will take a giant leap forward. This is an important development for our nation's fiscal policy. But the mergers of state owned banks must not merely increase the size of state owned banks. The state owned banks must also develop market-oriented management skills.

In recent years, domestic banking sector profits have reached record highs. In particular, the Bank of Taiwan and Megabank have enjoyed substantial increases in overseas profits. This means that deregulation of cross-strait financial transactions and the finance industry has enabled Taiwan banks to reach their full potential. But as everyone knows, the domestic banking sector has too much competition and market fragmentation. State owned banks are all rushing to gain market share. The result is cuthroat price competition. Promoting financial consolidation and overseas expansion is indeed a top priority.

Mergers of state owned banks, carried out for their own sake, will not result in favorable conditions and operating synergies. We must do more than advocate mergers. An even more importan consideration is how the banks will be operated following the mergers. We must create a new method of operations for state owned banking organizations.

The chairman said state owned bank mergers require separate management and ownership. We agree. We need a flexible pay system for individuals with talent, and other measures. Senior management salaries in state owned financial institutions are restricted. Their pay may not exceed ministerial level salaries in government agencies. This lack of flexibility in regional financial institutions makes it difficult to attract effective, high-quality senior managers. The defects in the system must be addressed. Take operations. Policies must be market-oriented and consider costs. The government must budget for this. Only then will the costs and benefits of state owned banks be apparent. Accounting must be clear. Rewards and punishments must relate to job performance. Only then will company performance improve.

A more fundamental problem is the assignment of chairmen. In the past state owned bank chairman appointments were based on seniority. If one was old enough and if one's resume included the Treasury or FSC. one could become a bank chairman. The appointment would be based on "can't go wrong" considerations. It would value a highly cooperative attitude in policy execution. Avoiding corruption would be a high priority. Seldom would a candidate be creative or make any substantive contribution to the industry. Future appointments should not be political rewards. They should be based on professionalism. Job evaluations for employees of state owned banks should also consider this. Let the concept of state owned private banks be fully implemented. When the government shackles are reduced, business management flexibility will increase. State owned banks will no longer seek only market share. They will no longer engage in price cutting. And they will no longer have excuses for inferior performance.

Banks should emulate the corporate governance policy of Singapore's state owned Temasek Holdings. Temasek is 100% owned by the Singaporean government. Its fiscal year ended on March 31, 2013. The group's investment portfolio was worth $169 billion. It full-year earnings were $8.3 billion. Shareholders received returns of up to 8.9%. How did it achieve this performance? Temasek is an independently operated investment company. The government assigns a treasury official as director. But he does not interfere with business operations. The board is not involved in the daily operations of the company. It merely expects management to evince good conduct. detailed monitoring, regulatory compliance, and risk management. Its manager are recruited from all ogver the globe, from world-class financial institutions such as HSBC, Citigroup, and American Express. It hires financial professionals and experts familiar with the different sectors of the investment environment. As a result their performance is outstanding.

Temasek's corporate governance ensures the separation of ownership and management. It ensures high profits. This enterprise management system is worth applying to our own newly merged, state owned banking organizations.

Finally, government financial regulation must advance with the times. The way financial institutions are assessed must be reasonable. The scale of the institution must not lead to unfair treatment. We should no longer demand that "The government support the banks, and the banks support business." Everything should revert to market mechanisms. We can encourage "corporate support for employees" however, as a matter of corporate social responsibility.

When state owned banks perform well, the surplus will increase. For 100% state-owned financial institutions, the surplus should go to the treasury, to reduce the government's fiscal deficit. For listed banks, as long as earnings increase, the stock price will rise. Government-owned shares of the assets will increase. The surplus will increase. The dividends will increase. These can all be injected into the treasury.

When the mergers of state owned financial institutions are privatized, their stock performance will improve. This will reduce the the threat of foreign intervention. This will enable them to expand abroad. This will give them the opportunity to increase their profits. These are the positive results that we can expect.

The FSC wants to create model regional banks. It wants to give Taiwan's financial industry the opportunity to emerge from the doldrums and to achieve prosperity. We support the Cabinet and the FSC in their effort to promote mergers and restructuring of state owned banks.

社論－要公公併 更要市場化
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中國時報 本報訊
2014年03月06日 04:09

未來30年亞洲經濟將蓬勃發展，國銀必須把握亞洲成長契機，盡速走出去，政府決心推動國銀「公公併」，日前財政部長、金管會主委及中央銀行總裁財金三巨頭，向江院長報告推動亞洲區域性銀行及公股金融整併計畫，得到江院長的支持，相關部會將展開行動，讓公股銀行整併計畫往前邁進一大步。這是我國金融政策重要的發展方向。但「公公併」不能只是國銀規模的虛胖，必須同時培養公股銀行市場化的企業管理能力與制度。

近幾年國內銀行業獲利屢創新高，尤其台銀及兆豐海外獲利大幅增加。代表在兩岸金融往來開展及產業鬆綁後，台灣銀行業的潛在能量逐漸發揮出來。但大家熟知，國內銀行業過度競爭、市場零散，公股銀行為衝市占業績，殺價惡性競爭問題嚴重。推動金融整併及走出去，的確是重中之重。

然而公股銀行如果只是為併購而併購，將無法創造有利的條件與經營的綜效。因此我們主張合併不應只是業務上的合併，而更重要的考量是合併後如何經營，創造新的公股銀行企業文化。

我們贊同曾主委提出公股銀行整併需有經營權與所有權分離、人才薪資制度彈性化等配套措施。目前公股金融機構的高階經理人薪資，受限不得超過政府機構部長級薪水，在區域型金融機構的缺乏彈性，也很難吸引到優質高階經理人效力，制度缺失不改不行。在運作上，我們也認為政策任務應該市場化計算成本，並請求政府編預算埋單。如此才有辦法讓公有銀行的成本與效益都能夠透明。有了清楚的數字，據以賞罰相關的人員，公司的績效就可以更好。

一個更根本的問題就是董座的派任。過去我們對於公股銀行的董事長派任，往往是年紀夠大，經歷完整的財政部或金管會官員。可以想像這樣的董座，一定以「不出錯」為考量，而且對於政策任務，配合度極高，營運以防弊優先，少有開創性及業務上的實質貢獻。我們主張未來政府派任的董事長，不應是酬庸，而是應以專業為考量。對於公股銀行從業人員的考核也應以業績為考量。讓公有民營的觀念徹底執行。當政府的束縛越少，企業經營的彈性才能越大。公股銀行就不會只衝市占業績，亂殺價來競爭。績效的良窳也不能再找代罪羔羊。

另外，公股銀行應仿效淡馬錫的公司治理。淡馬錫由新加坡政府擁有100%的股權。截至2013年3月31日的財政年度，集團投資組合價值約1690億美元，全年盈利83億美元，股東回報率高達8.9%。能有如此績效，最重要原因是淡馬錫為獨立運作的投資公司，政府只派一位財政部官員擔任董事，完全不干預公司的商業運作。董事會也不介入公司的日常運作，只有要求管理層具備良好的品行、遵循法規和詳細監控風險管理的系統與程式。其管理層是一批面向全球招聘，從世界級金融機構如匯豐、花旗、美國運通聘來的金融專才及熟悉不同行業投資環境的專家，因此績效卓著。

淡馬錫這樣的公司治理制度在很大程度上保證了監督權和管理權的分離，也保證了高利潤的形成，這種企業管理值得未來套用在新併後的公股銀行身上。

最後，政府的金融監管，也應該與時俱進，考核金融機構的方式也應合情合理，不要因規模擴大，反而導致不公平的待遇。我們也不應再要求「政府挺銀行、銀行挺企業」這樣的政策思維，而是一切回歸市場機能。但可以鼓勵「企業挺員工」的企業社會責任。

當公有的銀行有好的績效，盈餘就可以增加。對於百分之百國有的金融機構，盈餘繳庫有助於改善政府的財政赤字。在上市的銀行中，只要盈餘增加，股價就會上升，政府擁有的股份資產就會增值。而盈餘增加，扣除各項準備，分配的股息股利也會增加，這些都是可以挹注國庫。

當「公公併」後加上市場化的企業管理可以讓公股銀行績效變好。讓外商入市的威脅減少，讓自己走出去獲利的機會增加。這是我們可以期待的好結果。

金管會有心打造指標性區域銀行，是台灣金融業打破沉悶再造繁榮的契機，我們支持江內閣與金管會，認真推動公股銀行的合併與體制改革。