Since the Ministry of Finance approved the opening of new commercial banks policy in 1980, many large consortia focused on the huge business opportunities in the financial market and competing to join financial territory and set up financial institutions as part of its conglomerate. So far, these consortia have all kinds of investment banking, bills, securities and insurance, financial services, although our country''s booming financial industry, but also a result of enterprise groups and created a complex financial industry stakeholders. Such as banking, because our financial environment is too competitive, and the decree and norms are unsound etc, it makes a lot of abuses from the non-arm’s length transactions on lending from banking industry and related party.
Therefore, this paper will have the possible non-arm’s length transaction from lending business between Taiwan''s banking industry and the related party as the main study, and do the research for below three topics:
First, discuss the lending business monitoring on stakeholders and collateral valuation issues internally.
Second, do the research on the issues of lending business which is non-direct correlation of related party transaction.
Third, discuss above questions base on Taiwan''s corporate governance rules and refer to the relatively advanced foreign national laws and regulations.
The findings of research showed that, the supervising mechanism in managing transaction between banking and related party is insufficiency, for example, in the mortgage collateral valuation, transaction conditions with stakeholders, the restrictions to the object and amount , the influential people’s monitor, the Board of supervision, and credit guarantee for endorsement management, circuitous indirect investment or improper financial arrangements and the use of name-trading and other issues remain to be strengthened.
Therefore, this paper provides the proposal that should give the restrictions on collateral transactions, the norms for stakeholders on the loan, the independent directors and audit system improvements, information disclosure and open to public, indirect circuitous credit management and other management direction. At the same time, the paper also suggested that our financial supervision authorities should strengthen management in the future for the banking industry and its stakeholders among the qualification recognition, scope of business and the amount limitation, etc.
Another solution for collateral valuation issues, on this paper also proposed that the government and financial institutions to set up a valuation o institution or platform, at the same time, if the financial superintendent have concerns on corporate financial reports, not only can request business owners should to explain, but also refer to the actual situation and issued different levels of alerts, in order to protect shareholders and the interests of the general investing public.