Officials (slowly) swing open doors of banking system

Taiwan is moving to loosen the tether on its banking system. But the process will be slow and careful.

''We believe in doing things gradually,'' says Robert Chien, deputy governor of the Central Bank. ''We are trying to relax controls over a long period, and this process will continue.''

One important domestic move has been for the Central Bank to give up its role as sole arbiter of the exchange rate.

Mr. Chien says: ''We set the ceiling, but we let the banks decide the actual rate based on market conditions. When they think it's time for a change, they tell us, and we almost automatically approve.''

There is widespread agreement that the present stage of national development requires a more sophisticated, flexible banking structure -- especially the development of more channels through which the local business community can gain better access to investment capital.

The Central Bank, for instance, favors a wider range of high and low interest rates to cater to various types of clients -- everyone from the chairman of a giant corporation to the operator of a back-street workshop.

''Yes, everyone admits our capital market is underdeveloped,'' Finance Minister Hsu Li-teh concedes. ''And it's very hard to achieve more sophistication.

''You cannot really buy that sort of technology overseas. You have to develop your own, which means creating a large cadre of experts in banking, legal affairs, accountancy, etc. And at present we don't have enough trained people to allow us to do what we would like to do.''

There are large holes in banking services that are now being offered, agrees Ronald Ho, president of the International Commercial Bank of China. His bank is the most active among local institutions in the automation and expansion of services as well as in moving overseas to participate in foreign syndicate loans.

He cites the lack of merchant and investment banks, as well as the currently weak capital market. ''We are encouraging moves to strengthen this aspect so that firms will increasingly go into the equity market for funds and not just rely on banks,'' he says.

Nor is consumer finance available at present. After the first oil shock in 1973, the government stopped real estate financing because of an explosion in prices. Banks today can finance the buyers of homes but they cannot lend money to the builders.

There is a flourishing curb market. Personal financing is often arranged through groups of private individuals forming a ''mutual loan and savings association'' (which these days the banks are willing to supervise for a fee).

The government would like to eliminate these and channel all financing through different types of banks to meet the growing needs of the economy. But Finance Ministry and Central Bank officials concede this will take a long time.

Foreign bankers in the future can expect more official encouragement. About four years ago, there were only 12 overseas banks with branches in Taipei. Today there are 24, and several more are waiting to move in. The original group was mostly American, but the newcomers are predominantly European.

''They used to think Taiwan was dominated by the Americans, but since the change of relations (the American switch to diplomatic recognition of Peking) European banks have become far more aggressive in establishing a beachhead here, '' one banking source said.

Mr. Chien insists there are few restrictions on foreign banks operating in Taipei. They can offer full banking services on lending and foreign exchange, and the only real restrictions are a ban on acceptance of time deposits and a limitation of one branch per bank in the country.

To this, foreign bankers would add their limited access to rediscount facilities at the Central Bank. Finance Minister Hsu comments: ''Foreign banks have made an immense contribution to this country in providing capital and introducing new banking technology.

''Yes, there are restraints on them, and in the long run we will have to let them play a more important role.''

Meanwhile, the government is examining the possibility of developing offshore banking, which has been so successful in Singapore and Hong Kong. But Mr. Hsu cautions: ''I hope it will come, but we don't have enough qualified people yet to ensure its success.