The Taiwan Banker

Taiwan’s public sector is quite broad. Just like in several other countries, financial institutions established by receiving assets from the Japanese colonial government and people after World War II are the main origin of Taiwan’s public financial companies. Currently, the public companies listed by the Treasury Department of the Ministry of Finance include Taiwan Financial Holdings, Taiwan Land Bank and other banks that are purely public, as well as Taiwan Cooperative Bank and Mega Bank, which have been privatized but which are still controlled by the government. Besides banks, public financial companies also include life insurance, securities, asset management, investment credit, venture capital and other financial services. Although the government still controls management appointment in these companies, following privatization, the vast majority of banks are almost no different from purely private financial institutions from a consumer perspective. Therefore, public opinion tends to blame them for lagging in terms of operating performance or asset ranking, and infers that their operating performance is poor. But on a rainy day, when society needs a bailout program, these institutions need to recall their public sector roots and assume their public welfare roles. In fact, because such companies are under the jurisdiction of the national treasury, their shares are owned by all Taiwanese citizens, regardless of whether they purchase shares directly. They share the treasury with the government. When they earn profits, it fills the treasury; their losses weaken the overall wealth of the nation. Their corporate governance is carried out by means of publicly held equity, so they can also pay attention to financial stability and the public interest. Private institutions, in contrast, aim only to maximize profit. An IMF research report also shows that public banks in various countries play a role in stabilization during financial crises. Furthermore, in response to the pandemic, they have played a more important role in bailouts than private banks. A stable public banking system benefits protection of the financially disadvantaged and achievement of public policies. Therefore, if performance evaluations of public banks only look at ROE, ROA, or quarterly profitability – that is, the government acts like a private shareholder – then public finance will be adversely affected. Taiwan’s current policy and financial needs include wind power investment and financing, vigorous promotion of social housing, and development and improvement of national defense forces. It will be both feasible and necessary for public banks to lead issuance of financial products to strengthen the country, which can then be passed to private banks to drive inflow of capital. Looking back, Taiwan also entrusted policy banks to handle financial innovation during its land reform experience in the 1950s, such as “Taiwan Province Land Bonds” and “Urban Average Land Bonds,” helping drive project cash flow. Imagine now if public banks jointly developed “Taiwan Health Care Bonds” to meet the challenges of aging and a declining birthrate. There are many possibilities.