Taiwan's CTBC Financial Deal with China CITIC Bank Collapses

CTBC Financial Holdings, the parent company of Taiwan's leading credit card issuer, and Chinese state-backed lender, China CITIC Bank Corp, have reportedly cancelled investments in each other amid renewed political tensions, Finance Magnates has learned today.

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As reported in Reuters, this is the first deal collapse since the pro-independence Democratic Progressive Party leader Tsai Ing-wen became president of Taiwan earlier this year.

However, China CITIC Bank's president said there was no political aspect related to the decision because as a commercial bank, “we can’t play a leading role in politics”.

Failure to Meet Regulatory Requirement

The collapse of the deal was said to be mainly due to financial regulatory policies in the two locations with the parties unable to reach agreement on some aspects of the commercial terms.

CTBC did not submit applications for the deal with Taiwan's Financial Supervisory Commission as China CITIC Bank had failed to meet a key regulatory requirement which states that Chinese banks investing in Taiwanese banks must have branches in OECD countries for more than five years.

Taiwan is regarded by China as an unruly province and as a resulting terminated a communication mechanism with the island in June, concerned that it would push for formal independence.

A Price Waterhouse Coopers executive allegedly commented that "the overall environment is not good. These two firms are politically aware. They knew the deals would not gain regulatory approval given the current political climate."

Deal Background

CTBC agreed to pay T$11.67 billion ($368.63 million) for the 100 percent stake in China CITIC Bank Corp subsidiary CITIC Bank International (China) Ltd in May 2015. In Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term, China CITIC Bank Corp would acquire a 3.8 percent stake in CTBC.

CTBC Bank, a CTBC subsidiary, also cancelled a deal to buy a 51 percent stake in the Malaysian branch of Royal Bank of Scotland earlier this month.