President Ma Ying-jeou addressed the 27th Asian Bankers Association (ABA) General Meeting and Conference on the morning of November 2 and reiterated that the government is making every effort to establish a stable and effective financial system. The nation is also seeking to actively participate in the process of regional economic and financial integration, and to make a contribution to global economic development, he said.
President Ma noted that since the ABA was established in Taipei in 1981, it has long been a source of excellent information for its members on banking opportunities in the Asia-Pacific. It has also issued publications that are valuable references to market participants and policy makers, and made outstanding contributions to development of the regional economy and the banking industry.
The president commented that the ABA's annual general meeting offers an excellent venue for dialogue between the public and the private sectors. The theme of this year's conference was "Asian Banking: Sustaining Business Recovery Amidst a Changing Financial Landscape," and the president said he is confident that the discussions on this theme will generate considerable food for thought.
He remarked that the current financial crisis poses both challenges and opportunities to economies around the world. Commenting on the situation here at home, he noted that Taiwan has sound economic fundamentals, and long before the financial crisis our regulators were already pursuing policies focused on financial stability, working especially hard to ensure the financial strength of domestic banks. The president said that this approach has significantly enhanced the ability of our financial system to deal with risks. In particular, the government adopted response measures right from the early stage of the financial tsunami to mitigate its adverse effects. The Central Bank, for example, lowered interest rates seven consecutive times to provide extra liquidity to the market, former Premier Liu Chao-shiuan announced a blanket bank deposit guarantee that effectively stabilized small- and medium-sized private banks, and the government initiated the so-called "three supports" policy, whereby the government supported banks, the banks in turn supported enterprises by continuing to provide financing, and enterprises supported workers by keeping them on the payroll.
President Ma informed his audience that, to boost the economy during this period, the government also adopted several economic stimulus actions and job creation measures entailing expenditures of NT$738.3 billion (roughly US$21.4 billion), or about 5.44% of Taiwan’s 2008 GDP. These measures were aimed at promoting consumption, expanding public infrastructure projects, spurring private investment, encouraging entrepreneurship, and inducing the private sector to participate in public infrastructure development. Meanwhile, to restore market confidence and provide a stronger financial safety net, the government initiated a blanket bank deposit guarantee in October 2008 that will remain in effect till the end of this year. The president reported that the government has taken a number of steps to ensure a smooth exit from the blanket deposit guarantee, including enhanced banking supervision, and publicity activities to familiarize the public with the upcoming change. At the same time, he said, financial institutions are also required to strengthen their risk management capabilities so that they will be well equipped to deal with future challenges.
President Ma stressed that even during the worst period of the financial tsunami in 2007 and 2008, Taiwan's banks were still able to maintain a relatively low average non-performing loan (NPL) ratio of about 1.5% and an average capital adequacy ratio of about 11%, which was comfortably higher than the international standard of 8% for well-capitalized banks. The global economic recovery that gradually unfolded, starting in late 2009 and early this year, has pushed these indicators to their best levels ever here, he said, with the average NPL ratio among domestic banks falling to 0.87% and the average capital adequacy ratio exceeding 11%. In addition, Taiwan's economic growth in the first half of this year is estimated to have reached 13.1%, while GDP growth for the year as a whole is expected to hit 8.24%. Meanwhile, exports, which are viewed as the driver of short-term economic growth, have entirely recovered to pre-financial crisis levels, while gross fixed capital formation is also quite strong, he said. The president pointed out that the International Monetary Fund has even forecast that Taiwan's economic growth this year will hit 9.3% and that Taiwan's growth in the 2013 to 2015 period will be the strongest among the four Asian tigers.
The president commented that the government will continue to work actively to bolster economic growth momentum and make Taiwan a more attractive place for both domestic and foreign investors. These efforts include infrastructure projects, such as the i-Taiwan 12 projects, and the development of six major emerging industries and the 10 key service industries. Other measures are aimed at encouraging private investment, creating high growth in employment, incentivizing innovation, and promoting the development of carbon reduction technologies and industries, he said.
President Ma assured listeners that the government understands the importance of a sound and efficient banking system to the nation's economic and industrial development. Consequently, his administration will continue to build a well thought-out legal framework and adopt capital adequacy standards that meet international criteria. At the same time, the government will promote strengthened corporate governance among banking institutions, enhanced risk management and liquidity, and mergers among financial institutions, he said. It will also encourage foreign participation in Taiwan's market, strengthen consumer protection, and promote financial literacy, the president stated.
The president then turned his attention to cross-strait affairs, saying that three Memorandums of Understanding (MOUs) were signed by the financial authorities of Taiwan and mainland China in late 2009, providing the necessary legal basis for cross-strait supervisory cooperation in the fields of banking, securities & futures, and insurance. In the meantime, the cross-strait Economic Cooperation Framework Agreement (ECFA) signed in June this year will enable domestic firms, effective beginning next year, to benefit from tariff reductions and eliminations on 539 goods exported to mainland China. In addition, domestic services suppliers in 11 sectors, such as financial services, health care, computers, R&D, and movies, will also gain access to the mainland market. President Ma also noted that the government hopes to sign free trade agreements or economic cooperation accords with other trading partners, as this will contribute to Taiwan’s economic development and prosperity while also generating enormous business opportunities for the global market.
President Ma said that the financial landscape is continually changing and the global economic focus is shifting to the Asia-Pacific region, and against this backdrop the government will maintain a flexible supervisory regime, take supervisory measures that are suited to the situation of our domestic banks, and actively consult with the industry to better enhance the dynamism and competitiveness of Taiwan’s financial markets. He added that Taiwan will also step up its economic and financial supervisory cooperation within the region with an eye toward making a sustainable contribution to the region and creating a brighter future for the world.