Taking On Taiwan's Banks

The year of bank reform. That's what Taiwan's Ministry of Finance dubbed 2001. But almost four years later, little restructuring or consolidation has taken place in Taiwan's troubled banking sector -- despite new laws making mergers and foreign investment easier in what had been one of Asia's most cosseted financial arenas. The culprit is a dearth of political will and strong opposition from state-owned banks that control half of all assets. But that deadlock may finally be broken by a new financial watchdog, the Cabinet-level Financial Supervisory Commission (FSC), and Kong Jaw-sheng, its 49-year-old, gung ho chief.

Taiwan's banking system has two big problems: too many banks, and loan policies that have traditionally lavished financing on government-backed projects, many of which were bad credit risks. Kong sees his job as paring the number of banks, opening bank operations to independent scrutiny, and modernizing management via privatization and foreign investment. "If we succeed, it will help profitability, enhance competitiveness, and make the market more attractive to foreign institutions," Kong says.