TAIPEI, Feb 23 (Reuters) - Taiwan's financial regulator is considering varying the limits on stakes Chinese banks can hold in local ones as it faces calls from Taiwan institutions to allow closer ties to boost their chances of access to the huge mainland market.

An agreement allowing Chinese banks to take stakes of up to 5 percent in Taiwanese peers went into effect in January, but immediately drew calls from the industry to allow stakes of up to 20 percent as the smaller figure was seen as too little to attract interest.

Financial Supervisory Commission vice-chairwoman Lee Jih-chu said on Thursday that one option was to vary the investment limit by bank.

"We can further consider differentiating the limits for financial holding companies and for financial institutions controlled by private equity funds," Lee said during the Commonwealth Economic Forum in Taipei.

But she added that the issue of controlling stakes was sensitive.

"We hope to see Chinese banks as strategic investors so that they can help Taiwan banks tap the mainland market," she added.

"When the talk of Chinese banks getting a controlling stake comes up, Taiwan's banks' main shareholders care very much about that," Lee said.

A landmark trade pact in June 2010 opened up the China market to many Taiwan industries and held out the promise of a surge in new business for the island's financial sector, constrained in a crowded and competitive local market.

But progress has been slow, held back by acute political sensitivity in Taiwan over inroads into the finance sector by China, which remains a political rival and even a possible military foe with a stated ambition to take Taiwan back.

Bankers say raising the investment limit would make Taiwan banks much more attractive for mainland peers and would lead to further reciprocal opening by China.

So far two mainland institutions, Bank of China and Bank of Communications, have been approved to open branches in Taiwan. China Construction Bank (CCB) and China Merchants Bank have representative offices only.

Most of the links between mainland and Taiwanese banks are currently only agreements to explore future business opportunities. (Reporting by Faith Hung; editing by Jonathan Standing)

2012-02-23 08:01:25




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