The Taiwan Banker

According to statistics compiled by the Financial Supervisory Commission (FSC), the broader domestic banking industry performed well in 2021 due to an increase in net interest income, among other factors. However, we should seriously consider whether this strong profitability can be sustained. For the long-term development of the industry, we must take stock of current internal and external development constraints and challenges.Making good use of accumulated profits The industry has long been limited by low interest rates, bottlenecks in fintech applications, the need to strengthen new types of investment and financing capabilities such as offshore wind power, as well as difficulty in competing with international peers. The international business environment also continues to be challenged by geopolitics, changes in international financial governance rules, the rise of ESG, and technological giants such as Facebook and Amazon Web Services (AWS) entering financial services (Figure 1).The high profits the industry has accumulated over the past two years give it an excellent opportunity to think about future development and talent cultivation. This is the idea behind the International Finance Institute (IFI), modeled after the Taiwan Semiconductor Research Institute, in accordance with the Ministry of Education’s “Regulations on Industry-University Cooperation and Talent Cultivation and Innovation in Key National Fields.” The IFI is expected to help strengthen the competitiveness of Taiwan’s financial industry for the next generation.In order to avoid the pitfalls of traditional education, and to truly meet the expectations of the industry, the IFI will pay special attention to practical orientation so that the experts it cultivates have innovation ability and a forward-looking vision. Therefore, it will invite domestic and foreign teachers with practical experience, use an English-language learning and exchange environment to form an international talent base, and provide practical internships for financial development issues in urgent need of resolution.The IFI currently plans a trial period of eight years. The first three will feature the establishment of master’s and doctoral degree programs, while their performance will be evaluated over the last two. During this period, the National Development Fund, with a government background, will contribute capital, also joined by the eight major banks under the Ministry of Finance, along with financial information companies, the Taiwan Stock Exchange, Taiwan Central Depository Clearing House and other official institutions. Under the invitation of the FSC, a number of private financial holdings companies including Cathay United Bank, CTBC, Fubon, SinoPac, Taishin, Shin Kong, Waterland, and E.SUN will also join the ranks of the investors. By combining the strengths of industry, government and academia, the IFI will open up new possibilities.Internationalized asset management talent urgently requiredHank Huang, President of TABF, has watched the long-term development of the finance industry, participated in training, and assisted in preparations for the IFI. Huang said that Taiwan's finance industry cannot compete with international financial centers such as Hong Kong on salaries. Moreover, there are regulatory issues. Many international financial experts in Hong Kong and Singapore work in private banking and private equity funds. After these people come to Taiwan, they find that the business models they used in the past are not applicable in Taiwan. The domestic financial industry must cultivate talent with an international perspective and understanding of the local regulatory environment.In particular, although Taiwan's financial industry faces both domestic and international challenges, the growth of its international investment position, as well as its long-term excess savings, give it a solid foundation for development of high-end asset management talent. However, most funds are still invested in foreign-designed financial products, so Taiwan’s current asset management business is still “pre-import substitution.” It still has great room to add more value. This phenomenon particularly highlights the scarcity of international asset management talent, which causes funds to flow to financial products designed and sold abroad.Huang emphasized that an inventory of the high-level asset management business structure confirms that the most critical talent gaps currently lie in middle-office product design and development, data analysis and risk management. Product design and development includes investment research, financial product design, and commodity trading. Therefore, the domestic financial industry generally expects that the IFI will cultivate experts in asset management and fintech.Six key functions shaping the core competenciesAfter establishing the current training direction, the IFI further considered functional asset management training frameworks in the UK, Singapore and Hong Kong, and proposed six functional frameworks (Figure 2) and planned courses accordingly. The curriculum was discussed at several previous expert consultation and cooperative enterprise meetings, and recognized by the heads of the Central Bank, FSC, Ministry of Finance, Ministry of Education, and more than 20 domestic and foreign participants and academic representatives at a cross-ministerial meeting held by the National Development Council on September 27, 2021.Huang explained that in order to assist the IFI, TABF has contributed its international talent pool accumulated over the years with frontline practical experience and supervisory skills, integrating years of experience in financial markets like Wall Street with English instruction ability, also including top Taiwanese candidates with excellent Chinese.“Talent is the key to the competitiveness of the industry,” Huang says. He mentioned the example of DBS Group’s recent purchase of Citibank’s Taiwan consumer banking business. In addition to the potential value of Citi (Taiwan’s) existing credit card products, wealth management and credit card customers, and international networks and databases, DBS more importantly got 3,500 Citi consumer banking employees, who are strong business leaders. This is undoubtedly a boon for DBS, and it also highlights the Singaporean bank’s determination to develop its international business.In addition, since mid-July 2021, the IFI has held several meetings with the Taiwan Financial Services Roundtable (TFSR), National Chengchi University, and Zhongshan University to communicate the vision and curriculum of the IFI, emphasizing industry-university cooperation to ensure that the planning is in line with the policy vision, and providing curriculum suggestions to help the IFI prepare from its own perspective and that of the cooperative universities. TABF has also held several meetings with capital contributors in cooperation with TFSR to communicate the vision of IFI and the value of the training, and gather important opinions on industry-university cooperation for the partner universities. The IFI has now created a “Zhongshan in the South and Chengchi in the North” structure. Both universities were approved by the Ministry of Education on February 8. The IFI is expected to start recruiting students in March this year and start classes in June. TABF’s preliminary tasks can be considered to be successfully accomplished.However, in order to achieve the policy goal of becoming a high-level Asian asset management and corporate financing center, the IFI has to rely on lecturers with international practical experience. Therefore, it needs to cooperate with tertiary institutions, international asset managers, and investment banking experts with relevant practical experience. “We are effectively linking international financial experts, bank human resources and university finance departments in order to improve Taiwan’s long-standing gap between theory and practice," Huang says.An industry-university cooperation model following international best practicesFinance is a highly regulated industry. It must both keep up with international trends and be properly localized. Therefore, international experts are indeed necessary. The future development space of the IFI is promising. In addition to cultivating financial talent, the research of the instructors should be practical rather than overly theoretical, and able to integrate with international product design and assets. The integration of operations and other practices has shaped a new generation of industry-university cooperation models and innovative development in the financial industry.Huang noted that TABF, a financial research institution for on-the-job training in the domestic finance industry, combines the training strength of the Taiwan Insurance Institute and the Securities & Futures Institute for the finance sector, while the IFI is a pioneer in pre-employment training. The industry expects that Chengchi and Zhongshan universities will successfully manage the IFI, completely solving the urgent skills shortage in the industry.“The industry expects students to come with questions and leave with answers,” Huang says. He adds that the IFI was successfully established with the financial support of the National Development Council and the financial industry. TABF is also willing to contribute domestic industry connections and international networks to assist the IFI cultivate experts with international vision and mobility, as well as high-level financial product development and international asset management skills, to drive the future development of Taiwan’s financial system. The author of this article is the deputy director of the Communication and Publishing Center of the Taiwan Institute of Finance and Economics