Research from Kapronasia and Oracle looks at Opportunities for Taiwanese Banks in China

Research Reveals Enormous Opportunities for Cross-Straits Banking and Strategies for Taiwanese Banks to Succeed in Mainland China

Core Banking Systems are Crucial for Taiwanese Banks Aiming to Compete Effectively and Differentiate Themselves

TAIPEI, TAIWAN – April 13th, 2011

According to a new research report entitled ‘Banking Cross-Straits: A Look at the Key Issues and Considerations for Taiwanese Banks Entering the Mainland China Market,’ 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.

Produced jointly by Oracle and Kapronasia, a mainland China based provider of research-based advisory and consulting services, 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.

The research report was designed to look into the dynamics of China’s financial services industry, impact on core banking systems and IT infrastructure, opportunities and challenges pertinent to cross-straits banking, particularly under the impact of the Economic Cooperation Framework Agreement (ECFA) signed between Taiwan and mainland China.

The report 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.

"This report is unique in that it not only provides insights into the situation on the ground, but also outlines the thoughtful and practical steps that Taiwanese banks in China have taken to manage the risks. It is evident that the use of IT, both as a risk management tool and a means of winning over customers in this fiercely competitive environment has been a key priority for Taiwanese banks in mainland China," said Elsa Yan, Senior Consultant, Kapronasia.

Building Robust Core Banking Systems to Support Market Expansion

As foreign incorporated banks are mandated to maintain an independent core banking system in China, it is imperative for the foreign banks to have a capable IT  team in place to help either relocate their core system to the local market, or install a new core systems. When assessing the compatibility and adaptability of current core banking systems for the mainland China market, there are four specific areas to consider:

  • Product design: core banking system structure/modules should match-up with domestic business structure, as result of the difference in financial regulation, credit development and accounting systems.
  • Accounting: China Accounting Standards (CAS) are being used in mainland China and are supported by China Banking Regulatory Commission.  Given that CAS differs from ROC GAAP, branches of Taiwanese banks are required to come up with a relevant chart of account to address the CBRC reporting requirements.
  • Regulator: A specific settlement interface is required to connect with PBOC.
  • Language: Simplified Chinese language is required in nearly all the banks.


There are 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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