When is a foreign bank not a foreign bank?
Answer: When it establishes a domestic subsidiary.
Between 2007 and 2013, five leading international banks – Standard Chartered, Citi, HSBC, DBS, and ANZ – received approval from the financial authorities to expand their presence in Taiwan’s retail banking market by taking over the operations of local banks. In two cases the local entities involved were distressed banks, and the government paid subsidies to the acquiring institutions through the Financial Restructuring Fund as a means of stabilizing the financial system and supporting the troubled banks’ depositors.
As part of the process, the enlarged banks obtained licenses as domestically registered subsidiaries, in addition to their previous status as branches of their parent companies overseas. But the bulk of their business is now run through the subsidiaries, which under the law are regarded as domestic institutions.
Counting those subsidiaries, Taiwan now has 38 domestic banks, plus such other domestic financial institutions as credit cooperatives and the credit departments of farmers’ and fishermen’s associations. There are also 30 local branches of foreign banks, which are primarily involved in corporate banking.
Standard Chartered Bank (Taiwan) became the first locally incorporated foreign-bank subsidiary in 2007 after it merged with Hsinchu-based Hsinchu International bank. It now operates a total of 74 branches around the island.
In the same year, Citibank Taiwan created a subsidiary after merging with the Bank of Overseas Chinese. The enlarged bank has 38 branches located in Taiwan’s six major municipalities.
Two more subsidiaries were formed in 2008 through government-assisted takeovers of troubled banks. HSBC (the Hong Kong and Shanghai Banking Corp., headquartered in the UK) acquired The Chinese Bank in March of that year, and DBS (the Development Bank of Singapore) assumed control of Taiwan’s Bowa Bank that May. The HSBC branch network now extends to 58 locations and DBS’ to 39.
In 2009 ANZ (the Australia and New Zealand Banking Group) purchased the banking units of RBS (the former Royal Bank of Scotland) in several markets, including Taiwan, and in 2013 incorporated the operation as a subsidiary. Late last year ANZ announced that it was selling its retail and wealth management operations in Taiwan and certain other markets to DBS in order to concentrate on corporate business.