The Impact Of Financial Holding Company Act On The Operation Of Commercial Bank In Taiwan

"The Financial Holding Company Act" of 2001(hereinafter refer to the "Act") passed in November 2001 is an Act aiming to solve the over-banking problem in Taiwan and enhancing the competitative of Taiwanese banks.It removed the barrier between commercial banks, insurance companies and securities firms allowing them to affiliate under a new financial holding company structure to engage in a broader range of activities and cross-selling each affiliate's products.The purpose of the paper is to examine the effectiveness of the Act.More specific,it examines the impact of the Act on the operations of Taiwanese commercial banks, which converted to Financial Holding Company after the Act was stipulated.There were 12 banks as the sample in the paper.The statistic analysis and T-test were used in the paper with a two-stage analysis.The paper examined the operations of the 12 banks as a whole,and compared the operation performance of the whole group between 1998-2001(pre-act-period) and 2003-2006(post-act-period).Then,the paper furthered to compare each bank's operation performance between pre- and post- act-period.The empirical results of the paper revealed that (1) the Act,in general,made no significant improvement on the operations of the 12 Taiwanese commercial banks;(2) there were significant changes for Chinatrsut Commercial Bank,Mega Commercial Bank,and First Commercial Bank.However,the improvements were limited within the improvement of liquidity and asset quality;(3) the Act did make the banks to modify the components of their asset structures.For instance,they have shifted their business lines to other non-interest-income activities.