A new research reports that there are increasing business opportunities for Taiwanese banks to expand into mainland China and closer cross-straits collaboration will drive innovation in banking products and services and the use of information technology.
Entitled ‘Banking Cross-Straits: A Look at the Key Issues and Considerations for Taiwanese Banks Entering the Mainland China Market,’ the report notes that such innovation will help banks to manage risks and improve business efficiency as well as speeding changes in core banking systems and IT infrastructure which help to address local regulatory compliance requirements.
Produced jointly by Oracle and Kapronasia, the report also reveals that the relaxation of cross-straits financial regulations will enable Taiwanese banks to provide better customer service and product offerings at a lower cost. Taiwanese banks will also be able to tap into the new business opportunities from the vast local banking market by introducing a range of innovative and differentiated banking services such as RMB-denominated business, corporate finance, foreign exchange deposits, loans, remittances and trade finance. Taiwanese banks will also be in a better position to provide services for more than 100,000 Taiwanese firms that already have investments in China.
Riding on the extensive experience in serving SMEs particularly in the field of credit loans and risk management, Taiwanese banks can focus on the burgeoning opportunities in the rapidly growing small- and medium-sized banking segment and rural banking in mainland China. They can speed up their market penetration through partnerships with major local banks or take equity positions in local regional banks. Wealth management is also another potential high growth area for Taiwanese banks.
The sheer market size and complicated business and regulatory environment in mainland China exposes Taiwanese banks to greater business and operating risks than they face in Taiwan. The report reveals the needs for Taiwanese banks to strengthen their internal risk control mechanisms and IT infrastructure in their Chinese branches in order to better comply with local rules and regulations and reduce operating and credit risks.
The report lists some key success factors for foreign incorporated banks or Taiwanese banks to build their independent core banking systems in mainland China:
* Plan for system relocation: Banks will need to communicate and coordinate regularly with the regulatory authority in order to determine how to achieve the relocation, realize system independence and meet regulatory compliance requirements.
* Develop the local IT team: Management should ensure that the IT team has the correct skill set to handle the post-independence management, including day-to-day operation and maintenance of core banking systems.
* Disaster Recovery Planning: Local disaster recovery plan should be taken into consideration. In the overall planning of system independence projects, disaster recovery resource investment, selection of recovery sites and scoping of the disaster recovery scale should be included.
The report also highlights the importance of partnering with qualified vendors which have a strong global presence, high commitment to local market, good industry reputation and credentials, and extensive local project implementation experience. Strong global core-banking providers can bring experience from larger global deals to engagements in mainland China. Larger global players typically have a stronger R&D team to invest in and develop more sophisticated systems to meet complex business needs from banks.
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