Study of Taiwan Financial Industry Supply Chain Forward Integration - Using examples of Foreign Bank Subsidiaries

A Goldman Sachs partner once spoke to me, “no matter how many years in the financial industry, there were always things that could surprise you.” Look back in the history, every financial crisis happened, the root cause was always different. Under the increasing competitiveness of international financial environment, the financial industry was forced to take a closer look of financial industry supply chain after the Lehman Brothers crisis in 2008. Taiwanese government implemented two financial reforms to help the financial market become more liberalized and internationalized. The first financial reform was to achieve horizontal integration of financial industry supply chain, and the second reform was to achieve vertical integration of financial industry supply chain. Taiwanese government hoped to strength the domestic bank’s international competitiveness by using mergers and acquisition (M&A) strategy to enhance operational efficiency, and find synergy to scale up the financial institutions. But the key to success of M&A lied in many faces, such as business philosophy, organization structure, company culture, and people management. Therefore, companies must have diversification thinking when executing M&A strategy. The study of Taiwan financial industry supply chain forward integration is to use three foreign banks namely Standard Charted Bank, Citibank, and Hongkong and Shanghai bank M&A case analysis to review the integration process during the merger. In addition, the study also uses comparative analysis of financial performance to review profitability, cost efficiency, organization structure, culture, and people management before and after the merger by comparing the data to average of Taiwan banking industry. The conclusion of the study indicated that after the M&A, there were obstacles and conflicts during the integration. The top management needed to map out a clear strategy and offered attractive early retirement package to smoothly minimize the culture impact to achieve economic of scale and finding the synergy. The Taiwan financial industry supply chain forward integration was successful from each case analysis. Citibank (Taiwan) Limited and HSBC (Taiwan) Limited have achieved better financial result than SCB (Taiwan) Limited but each bank seems to face different problems due to different international financial crisis. But the successful M&A strategy applied to financial supply chain forward integration has now been widely used in local private banks, namely, Chinatrust Commercial Bank, Fubon Commercial Bank, Cathay United Bank to “play Asia cup” which use M&A to expand the business into Japan, Vietnam, Malaysia, and Philippine. We hope the future government would allow the third financial reform to create a few strong Taiwanese banks by further merging the government banks to create a few world class banks to compete in the world cup.