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CHAPTER 6. INTERVIEW DATA AND DISCUSSION
This section adds the qualitative analysis to the quantitative data presented in the previous section. Using interview data alongside academic research a further discussion of the result will be presented. Interviews were conducted in a group session where topics were specified, though direct questioning was not used. Those interviewed were Sam Ang, Head of Global Banking at HSBC Taiwan, Ken Woo, previously a senior manager at Standard Chartered Taiwan, and Francine Wu the chairperson for the British Chamber of Commerce Financial Services Committee and CEO of Schroder Investment Management Taiwan.
6.1 Political Issues
During discussion relating to the influence of political issues with Taiwanese banks and their disproportional influence abroad interviewees predominantly confirmed results of the
questions and answered one of the key questions this paper hoped to resolve. To what extent do relations between China and Taiwan affect the banking sector? and is China using its influence abroad to reduce the influence of Taiwanese banking institutions? Interviewees felt that issues affecting Taiwan’s banks cannot be viewed in this light. While cross-strait
relations do have an effect, this is very much one sided and more a result of Taiwan’s policies toward China than any Chinese international influence to stifle Taiwan’s financial sector’s international influence. When we asked Syaru Shirley Lin she gave a similar response arguing that given the bilateral trade between China and Taiwan and the investments of the Taiwanese business community in China, it simply would not be in China’s interests to work against Taiwanese banks, she argues that when looking at cross straight relations the political and economic spheres must be separated to realise the opposite approaches in them. Instead she argues that governments in Taiwan have not done enough to allow and promote greater
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cross-strait exchanges in the financial sector.75 Sam Ang, agrees greater exchanges would likely allow Taiwanese banks to benefit from greater access to the Chinese market. However, she also argues this is simply unrealistic as a result of domestic party politics and the likely response of the electorate. Francine Wu, reminds us that many Taiwanese are still wary of any moves that seem to push the islands economic or political relations closer to China. This sentiment is especially strong among Taiwan’s youth and was most evident during the 2014 Sunflower Movement protests against the Cross-Strait Agreement on Trade in Services, which would have made cross strait exchanges easier for a number of industries including the banking sector. Protesters felt the agreement had not followed a democratic process and responded by occupying the Legislative Yuan, riot police were used to evict the protest, more than 150 people were injured and 61 arrested. The event drew the attention of international media and inspired national debate resulting in the failure of the agreement to be ratified to this day.76 In the election that followed in 2016 the KMT party suffered its most serious defeat with the DPP winning the largest winning margin since the island’s first election.77 Many argue the handling of Cross-Strait Agreement on Trade in Services and the handling of the ensuing protest were a heavy factor in this loss.
In this situation, we see domestic party politics as restricting some of the options for Taiwanese banks to gain greater influence abroad, giving that China is Taiwan’s biggest trading partner and closest geographical market this has considerable impact; however, it does not answer all the concerns for the sector’s disproportional influence abroad.
75Lin, S. National Identity, Economic Interest and Taiwan's Cross-Strait Economic Policy 1994-2009. [S.l.]: Open Dissertation Press, 2017
76Wang, C. "‘The future that belongs to us’: Affective politics, neoliberalism and the Sunflower Movement", International Journal of Cultural Studies, vol. 20, no. 2, pp. 177-192, 2017.
77 Glaser, B. "Tsai Ing-wen and DPP Win Big in Taiwan | Center for Strategic and International Studies", Csis.org, 2016.
[Online]. Available: https://www.csis.org/analysis/tsai-ing-wen-and-dpp-win-big-taiwan. [Accessed: 15- Jul- 2017].
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6.2 Economic Issues
The interview results saw the topics of overbanking and access to capital take overwhelming importance over economic stability and risks associated with the New Taiwan Dollar.
Unsurprisingly those interviewed also identify these as the most prominent issues facing the Taiwanese banking sector today. Ken Woo treats the two topics as one, arguing it is
overbanking that results in issues associated with access to capital, this is a logical explanation repeated in much of the literature.78 Woo however goes further to say that traditionally as banks struggle to get access to capital in their own market it would be natural to explore opportunities overseas, taking advantage of underserved markets to gain access to new capital and opportunities. However, in the Taiwanese case, banks have struggled to grow to a point where they feel confident to compete with other international banks internationally.
The market for him is entering an era where the largest global banks have too much influence to allow for the rising of new banks. He argues that the best opportunity for growth
internationally is now in through M&A, he raises the case of Singapore bank DBS acquiring ANZ commercial operations in Asia as an example of this, but again the issue comes back to the capital requirement and risk associated with such M&A options.
The whole system becomes a vicious cycle for Taiwanese banks, without further reforms aimed at encouraging more banks in Taiwan to merge the problem will persist. Ang suggests that simply encouraging banks to merge is limited in the success it can achieve. Instead she argues that wider structural reform in the sector is necessary. She says the problems with Taiwanese banks goes right to the core of issues affecting the wider economy and politics in Taiwan. A number of Taiwanese banks are family operated and used to support the business
78 Tan, A. "The Politics of Financial Reform in Taiwan: Actors, Institutions, and the Changing State", Asian Affairs: An American Review, vol. 36, no. 4, pp. 201-212, 2009.
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interest of some of the wealthiest families in Taiwan.79 This is it agued drives an array of the issues associated with overbanking as even relatively weaker banks are fulfilling their purpose of supporting a business interest of those at the top. This in turn inverts normal market principles that argue the most efficient and profitable banks will acquire less successful ones or drive them out of the market. In this scenario therefore, smaller, less efficient banks remain and still control capital that is then denied to other banks. Ang
believes that only structural reform would resolve this issue but carries much political risk for any party that wishes to pursue such an agenda going against the interest of the elite.
6.3 Globalisation Issues
The globalisation section of the questionnaire offered some surprising results, it was originally projected that other international financial centres would have a large role in Taiwan’s banking industry’s disproportional influence, however results showed this to be only a minor concern; financial regulations on the other hand were the top concern from those surveyed. Wu argued that at the current stage in the development of Taiwan’s banks international financial centres like Hong Kong and Singapore were of little relevance. She argued that without significant reform that resulted in further merging of Taiwanese banks and greater access to the Chinese market they would fail to be competitive in places like Hong Kong. She continued by stating that much of Hong Kong’s success as a financial centre is because of its easy access to opportunities and capital from the Chinese market.80 As current regulations stand Taiwan’s banks could not offer the same services and thus would lose much of the selling points investors wish to find in bank services there. Woo argues that other international financial centres are a challenge for Taiwan as a whole, he tells us that
79Chen, P. and Liu, P. "Bank ownership, performance, and the politics: Evidence from Taiwan", Economic Modelling, vol. 31, pp. 578-585, 2013.
80Woo, J. Business and politics in Asia's key financial centres. Singapore: Springer, 2016
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many governments have promoted the idea of building Taiwan as a financial centre, though the regional competition is too strong unless Taiwan can offer easy access to Mainland China’s market and a better environment for international banks in Taiwan. However, when considering the effect for Taiwanese banks abroad it is of less consequence.
A second issue that was raised in the questionnaire was the Strength of the State Banks. Ang says that this again connects to the issue of overbanking and access to capital, she says a number of state banks have been merged as part of government encouragement to do so;
however this has only strengthened the state sector. The state sector is considered less
efficient and less able or driven to compete abroad, she argues that the number of state banks in Taiwan is much higher than considered politically necessary.81 Ang again however
considers the risk of privatising state banks or merging them with private entities. These actions draw public attention and often violent criticism, past examples have led to
allegations of corruptions and selling state assets for undervalued totals.82 Consistently we see that measures that may hope to improve the ability for Taiwanese banks to compete on a level field internationally require actions that are unfavourable for the electorate, and subject to domestic political divides.
6.4 Ease of Doing Business Issues
While ease of doing business was the most important issue shown in questionnaire results not all those interviewed agreed with this. They all argued that Taiwan was an excellent
environment for businesses to grow and develop, though there are challenges they observe now, that were not issues previously. The greatest issue all three interviewees agreed on is
81 Wang, H. The Financial Reforms in Korea and Taiwan. Asian Banking Association, 2003.
82Pan, J. "Group files corruption lawsuit against Ma over Fubon - Taipei Times", Taipeitimes.com, 2016. [Online].
Available: http://www.taipeitimes.com/News/front/archives/2016/10/19/2003657462. [Accessed: 15- Jul- 2017].
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stagnant wages alongside a rising cost of living, it is argued that many talented Taiwanese graduating from the best universities in Taiwan and abroad are seeking opportunities
overseas or with international companies, especially in the banking sector. Opportunities with international banks are heavily sought after, due to the higher salaries paid and opportunities to work in global offices outside Taiwan.83
In recent years Taiwan has seen very poor wage growth, especially for entry positions, while the banking sector is comparatively well paid, similar positions abroad command
substantially higher salaries. Taiwanese banks are therefore struggling to compete with international companies and positions abroad to attract the best talent. Woo tell us Taiwanese banks abroad mostly serve wealthy Taiwanese in those markets with business interest in Taiwan and an existing relationship with the bank, this focus on Taiwanese clients he argues makes it difficult for Taiwanese banks to seek international talent also, language barriers become an issue not because of English but rather because the working language of many Taiwanese banks even internationally is Mandarin Chinese as oppose to the industry norm of English. Many talented professionals in the banking industry that are not Chinese speakers are then less likely to be considered for opportunities with Taiwanese banks. He states that unless Taiwanese banks expand their own horizons and look outward for greater investment options then Taiwanese banks will remain too focussed domestically to be able to succeed abroad and gain greater international influence.
83 2016 Taiwan Salary Survey. Taipei: Robert Walters Taiwan, 2016.
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