The Taiwan Banker

Forty percent growth on the basis of a 2020 pre-tax profit of more than NT$ 600 billion has given Taiwan's financial industry record 2021 profits of NT$936.6 billion – one step away from a trillion. This achievement portends great expectations for future performance.Most notably, the emergence of COVID variants in 2021 had a considerable impact on the international economic and trade environment. Taiwan's banks increased their allowances for bad debts and foreign exchange reserves, and greatly improved their asset quality and capital adequacy ratios, thus strengthening operational resilience. The finance industry is now in better shape to meet the challenges of the next stage of development.However, further analyzing the 2021 results, we can see that growth in the finance industry is highly uneven. Benefiting from the vigorous development of the stock market in 2021, life insurance, securities, investment credit, and property and casualty insurance have all grown more than 30%, which is much faster than other financial industries. Banking, in contrast, which also had a profit of over NT$ 300 billion in 2020, still maintained growth of about 8%, but a considerable gap has emerged compared with other financial industries. Has this industry subsector stalled?Similarly, if Taiwan’s economy is divided into ‘financial’ and ‘real production’ sectors, financial profits reached a record high in 2021, mainly relying on the contribution of real production sectors such as semiconductors, as well as the stock and capital markets. Income on the total bank assets of over NT$ 50 trillion, in contrast, has been very limited. This gap lurking behind the bright profit figures highlights the development constraints of Taiwan’s financial industry.How Taiwan's banking industry can improve its competitiveness, with its huge assets and army of millions of employees, has been a longstanding question. The experiences of Singapore and Hong Kong provide references. I hope that Taiwan's financial industry can accelerate its transformation to create new profitable business opportunities, but the key lies in human resources. If banks are unable to effectively promote talent transformation and strengthen majors such as fintech, asset management, and sustainability, they will only retain their existing capacities and markets, without generating organic growth.A domestic financial holding executive explained this constraint on development. “During the 1997 financial crisis, DBS Bank’s lending, total assets and other figures were not much different from those of Mega Financial Holdings plus First, Huanan, and Chung-Hwa banks. Twenty years down the line, however the profits of DBS Bank alone surpass those of all Taiwanese banks combined.” This is the same momentum that allowed DBS to bid to take over Citi (Taiwan) and continue to expand its business in the Taiwan market. To break through the talent limitation in Taiwan’s financial industry, only by rapid and swift digital transformation in Taiwan’s financial industry, as well as expansion of the asset management market, can we keep up with the development trends of international finance to effectively enhance our added value. Responding to the government's call for transformation, and with reference to the key industry positioning of semiconductors, International Finance Institute branches will be unveiled in Kaohsiung and Taipei to cultivate long-term internationalized financial talent. I hope that with the skills cultivated by the Institute, Taiwan is able to develop its banking industry to its full potential.