The Second Financial Reforms in Taiwan and Internal Control

• Main Authors: FAN, JEN-YAO, 范仁耀
• Other Authors: HSIEH, YAO-CHIH
• Format: Others
• Language: zh-TW
• Published: 2019
• Online Access: http://ndltd.ncl.edu.tw/handle/vwwj66

碩士 === 逢甲大學 === 商學專業碩士在職學位學程 === 107 === To promote internationalization and liberalization of the banking sector, the banking system of Taiwan has evolved significantly since the government amended the Banking Law in 1989. Private Banks now play a significant role in the financial system and many state-owned banks have been partially privatized. In view of the overcrowded banking market, Taiwan’s banking sector is marked by low profitability and excessive competition that are potential threats to the long-term health and stability of the financial system. Throughout the 1990s, the Taiwanese government announced a basket of measures to reform the financial system (known as “The First Financial Reform”) in the early 2000s, especially in light of the Asian financial crisis. The goal of The First Financial Reform is summarized as “2-5-8,” which refers to bringing the banking sector NPL ratio to less than 5 percent and increasing the capital adequacy ratio above 8 percent within two years. However, the First Financial Reform did not result in immediate improvements in the banking sector’s competitive landscape as relatively few mergers occurred during this period. To focus on improving the international competitiveness of Taiwanese banks, the government initiated a second round of financial reform (“The Second Financial Reform”) in 2004. One goal of the Second Financial Reform is to increase the market share of the top three domestic banks to above 10 percent by end-2005. The plan called for reducing the number of government-owned banks to six, cutting the number of financial holding companies by half by the end of 2006, and facilitating at least one financial holding company to list on an overseas exchange market or bringing in foreign investors. The Second Financial Reform was viewed as unsuccessful due to strong resistance from bank labor unions, political opposition, and public sentiment that the government unfairly favored family-owned conglomerates. Obviously, the Second Financial Reform of "limited quantity under limited time frame "to reduce the banks numbers within limited time” was a failure. The rapid increase of defaults on credit card debt during this period weakened bank profitability, making mergers more difficult. The Second Financial Reform was ended with serious scandals.