||Banking is a strategic industry of a nation. The role of the banks are not only to serve as an intermediary among the financial effectiveness of businesses and the public, it also promotes economic development of the country. The health of the banking system directly affects the country’s national security and the wealth of the society. In 1990s the Taiwanese government started to deregulate the financial industry in the promotion of open market by opening establishment for private banks and privatizing the public banks. However, during the time, the competition in the industry intensified as the number of banks grew dramatically, resulted in a reduction of the industry’s average net interest margin to drop below the international average level. During 2000s, the government implemented two financial reforms to improve the health of the country’s financial system. Although these actions reduced the overall banks’ loan loss level and increased the capital adequacy, the margin issue remained to be resolved. In addition, among those previously privatized public banks, many of them are still highly influenced by the government, which owns a significant amount of shares of the banks. The performance of these banks is subordinate compare to private banks on operation efficiency, profitability, and management effectiveness. |
In 2014, the regulator declared another financial reform targeted to transform one to two Taiwanese banks to become an Asian regional bank within 3 to 5 years. The government will try to promote M&A among banks by first merging the state-owned banks, to further improve the health of the financial industry and increase the industry’s competency. The action plan was established mainly based on Singapore’s previous success on DBS due to the similar economic environment and financial industry development between the counties. DBS is currently one of the largest banks in Asia and a subsidiary of Temasek Holdings, which is owned by the Singapore’s sovereign wealth fund.
This research plans to analyze the success of DBS and Singapore’s economy environment and financial industry development in order to provide suggestions to government’s banking system reform. Based on the analysis, there are six suggestions outlined as below:
1.Establish a sovereign wealth fund to govern the public sector of the nation, and
improve the effectiveness of resources.
2.Further deregulate the financial industry and promote open market.
3.Deregulate the corporate governance on public banks to increase operation
4.Increase public bank branding awareness and globalization.
5.Adjust public banks’ revenue source on increasing non-traditional lending and
6.Establish an international recruitment standard to attract top talents.