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Last updated at: (Beijing Time) Tuesday, November 27, 2001

Economic Slump in Taiwan Causes Retrenchment!

United World Chinese Commercial Bank, conferred the title of "the exemplary bank" in the Taiwan banking industry, recently introduced incentives to encourage employees to leave with high severance pay. Other big banks like Chang Hwa Bank and Bank of Overseas Chinese also took the same measures to deal with the severe trenchment.


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Retrenchment in Taiwan banking industry

  • United World Chinese Commercial Bank, conferred the title of "the exemplary bank" in the Taiwan banking industry, recently introduced incentives to encourage employees to leave with high severance pay. Around 250 staff are expected to accept the offer.

    On average, its 2750 employees generated 338 thousand yuan per person for the bank last year. The bank indicated a 10-per-cent retrenchment would increase market competitiveness and efficient use of manpower resources.

    The Taiwan banking industry has tightened its belt in response to the economy slowdown. Retrenchment of staff and material savings, such as cutting down on electric costs, will assist in keeping running costs low during this slump.

  • It is estimated that 200 billion yuan will be saved on manpower costs alone if industrial banks take 200 employees off its payroll. Chang Hwa Bank cut 300 billion yuan on manpower costs after it gave marching order to 147 employees. It is now considering a second round of retrenchment between September and December.

  • While large-scaled banks were conducting retrenchment exercises, some medium and small-sized banks began to launch various projects to lay off its employees. Taipei Bank is going to dismiss 200 employees with more than 10-year working experiences and reduce 200 billion in manpower costs.

    Banks exploring new expansion opportunities

    With this economic slump, some banks were exploring new expansion and diversification opportunities. Bank of Overseas Chinese recently introduced a non-financial service - starting 1st December, people who go to Bank of Overseas Chinese for financial business can enjoy the wide-band Internet service offered by China Telecom of Taiwan. General manager Li Wenlong noted the aim of setting up non-financial services was to restructure the bank's services for consumers so as to meet the new challenges after the island province's entry into the WTO.



    Prospects for Taiwan's Banking Industry

    The Taiwan Institute of Economic Research's banking industry survey of economic prospects for 2002 shows that 64% of the island's bankers are optimistic about the economy while 36% are holding to a conservative attitude.

    Favorable Economic Factors

  • The sweeping out of malpractice in the financial industry will maintain financial order.
  • The Financial Institutions Merger Law, Financial Holding Company Law, and Trust Business Law will expand operating space and strengthen competitiveness.
  • The asset management mechanism will improve the overdue-loan situation, and the implementation of securitization will increase the liquidity of capital.
  • If the Legislative Yuan passes the Business Tax Law revision, the business tax for financial institutions will be cut from the current 2% to 0% and the extra profit that banks derive from this reduction will help them to write off bad loans.
  • The increased interest rate on deposit reserves will boost bank profits by an estimated NT$4.8 billion per year.

    Unfavorable Economic Factors

  • With the economy in a slump and the stock market weak, domestic demand and the real estate market will deteriorate and overdue loans will increase.
  • With Taiwan's entry into the WTO, foreign banks will come into the domestic market with their advantages of capital and financial innovation, and it will be difficult for domestic banks to compete with them.
  • The rising popularity of direct financing gives companies a short cut to the raising of funds and compresses the space for bank loans.
  • Financial relief measures, the lengthening of repayment terms, and preferential home loans increase operating risk for banks and reduce their interest-rate spread.


    • by PD Online Staff Yang Ruoqian
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