Impacts of Financial Asset Securitization Upon Competition and Integration of Financial Institutions's Fixed Income Businesses

This thesis mainly examines the impact of financial assets securitization upon financial markets in Taiwan, and then attempts to study the evolving competition environment for fixed income securities businesses and potential merger and acquisition trends among financial institutions in Taiwan.
Financial institutions approved to conduct fixed income securities businesses include banks, securities firms and bill finance companies. We suggest that full business deregulation would enhance sound financial market developments. Consolidation among financial institutions would become more crucial. And more diversified combinations should be considered. Furthermore, a consistent tax policy toward fixed income securities transactions would facilitate efficiency of financial market operation.
The main findings of this research are as follows:
1.Financial assets securitization drastically changes market structure of fixed income products, integrating indirect finance with direct finance, and blurring the line between short -term money market and long-term debt market, which tends to intensify new competition and mergers among financial institutions.
2.With respect to deregulating fixed income securities business for all financial institutions, we suggest the following deregulation priority sequence: broking and dealing in secondary market comes first, certification and underwriting in primary market follows up. As for the consolidation of financial institutions, more options and combinations should be considered, more opportunities more consolidation and reinstitution encouraged, and the transformation and exit mechanisms established.
3.To take full advantage of efficient money market channels in Taiwan, financial institutions are encouraged to aggressively promote asset back commercial paper (ABCP) business, which would enhance money market instruments. In addition, as more domestic investors embrace globalization trends in investments and financing, introducing domestic US dollar denominated bills market, along with domestic foreign currency denominated bond market, would promote Taiwan as a regional financial center.
4.As tax policy for financial products affects the market structure and development of financial markets, Government authority should enact a fair, consistent taxation system that facilitates a balanced development in financial markets. A single separation tax rate for financial products is strongly recommended for long-term tax policy.