Legislators to append clause to finance bill

The China Post staff and agencies1

The Legislature is expected to add a condition to the implementation of the financial holding companies bill that is slated for legislative review next week.

An additional clause will be attached to the bill to demand that no applications for setting up financial holding companies should be submitted before supervisory regulations on financial holding companies are written into law, according to the China Times Express.

The legislature is scheduled to convene an extraordinary session next week to discuss six bills related to financial reforms.

The most noteworthy bill is the one that will allow various kinds financial institutions — such as securities companies, banks, insurance companies — to form a financial holding company under the name of one of the constituting institutions.

The law, after being implemented, is expected to speed up consolidation of the island’s financial sector, which is over crowded.

the profit margins of local banks have been declining since the banking sector liberalized in early ‘90s. The paper said yesterday that the additional clause is aimed at preventing financial companies’ operations from running out of the government’s control. According to the paper, the additional clause was drafted in the wake of the surprise sacking of China Development Industrial Bank President Benny Hu by the bank’s chairman Liu Tai-ying. The bank, which is also Taiwan’s largest venture capital company, is one of the most active financial institutions seeking to set up financial holding companies.

It was reported that Liu’s decision was made in defiance of what the government had hoped.

President Chen Shui-bian reportedly called Liu before the bank’s board meeting to express hopes that Hu would be renamed president.

Meanwhile, Vice Finance Minister Sean Chen yesterday asserted the ministry’s position against lawmakers’ idea that another law, on setting up a financial supervisory committee, should be passed together with the financial holding companies law. Chen said the government already has a supervisory mechanism in place to monitor operations of financial institutions.

But foreign bankers said the two laws should be passed at the same time to prevent the creation of “financial monsters” that are too big for the government to bring under control. The agreement to hold the special legislative session came after President Chen Shui-bian’s request earlier this week. The next official session of parliament is due to start in September.

“Due to the impact of the downturn in the global economic climate, Premier Chang asked the president to request an extraordinary session of parliament…” a presidential statement said on Tuesday.

Lawmakers will review six draft financial laws or revisions to existing legislation: a financial holding company law, an insurance law, a resolution trust corporation law, a deposit insurance law, a business tax law and a bills finance management law.

The draft legislation would break down boundaries between financial services, allowing the creation of financial supermarkets offering everything from investment advice and insurance policies to retirement packages and banking services.

The government expects the passage of the closely-watched financial reform bills to strengthen the domestic economy, and promote the healthy development of the financial system.