Deregulation to underpin overseas growth for Taiwan’s financial sector

TAIPEI - Taiwan's financial institutions are likely to further expand their regional foothold in 2015, supported by gradual financial deregulation and declining margins in the home market according to Taiwan Ratings Corp., the Taipei-based subsidiary of Standard & Poor's.

In recent years, Taiwanese banks, securities houses, and insurance companies have expanded into mainland China and several regional markets where Taiwanese corporates already exist.

"We expect overseas diversification to help many financial institutions improve their business stability over the long term by reducing their revenue concentration on the domestic market," said Taiwan Ratings' credit analyst, Yuhan Lan.

"However, the pressure to sustain credit profiles and balance the risks from operating in unfamiliar markets could pose more immediate challenges for some institutions."

Taiwan's Financial Supervisory Committee has loosened capital restrictions on overseas acquisitions in recent years to encourage local financial institutions to reduce their dependence on the home market and strengthen their foothold in Asia-Pacific.

"Regulatory relaxation has done more than open the door to overseas expansion; it has sparked strong momentum for domestic banks, securities brokers and life insurers to pursue mergers and acquisitions overseas," said Lan.

"We expect Taiwan's financial institutions to place greater emphasis on overseas growth in 2015, amid thin margins and heightened competition at home."  www.standardandpoors.com (ATI).