'Finance minister' also warns local lenders against cutthroat competition for mainland market share

"Finance Minister" Lee Sush-der has ruled out a targeted bank tax, similar to taxes under consideration in other economies. Lee said the current economic environment is not conducive to imposing such a tax.

Lee, who was attending a hearing at the Legislative Yuan's Finance Committee, said any such measure must be fully assessed and studied before being implemented.

He was responding to a question from ruling Kuomintang (KMT) Legislator Lai Shyh-bao, who asked whether the government would follow suit if developed countries adopted bank taxes.

Germany and Britain are reportedly considering such taxes as a means to create reserves to pay for potential future bailouts. The deliberations follow a similar proposal in the United States made by President Barack Obama.

Lee also addressed the desire of Taiwan's banks' to expand into the mainland market. He declared public financial institutions must not engage in cutthroat competition against each other once they gain a foothold on the mainland.

Although government-run banks have less flexibility in doing business across the Taiwan Straits than their private counterparts, their symbolic status and large clientele are important assets, eagerly sought by mainland banks interested in forging joint ventures, Lee was reported as saying by the Commercial Times.

With many mainland banking executives mentioning government-run Taiwan Financial Holding Co, Mega Financial Holding Co and other government-run banks as possible partners, the "Ministry of Finance" wants their expansion into the mainland market to be orderly, the report said.

Public banks and financial institutions should cooperate among themselves and maintain order once they move into the mainland market, Lee said. He underscored the point that cutthroat competition for Taiwanese customers on the mainland will not be permitted.

Currently, eight Taiwan-based public banks maintain offices in different cities across the mainland, including Shanghai, Kunshan, a district in Shanghai that is now home to many Taiwanese companies, Suzhou and/or Shenzhen, he said.

The mainland branches are able to offer syndicated loans for Taiwanese companies operating there. These loans will serve as the foundation and commencement of the banks' joint cooperation, he noted.

According to the report, the "Ministry of Finance" has hammered out a "development program for state-owned business", which focuses on deepening roots in Taiwan, establishing strongholds on both sides of the Taiwan Straits and enhancing globalization.

China Daily/CNA

(HK Edition 03/25/2010 page4)