Taiwan has long been Asia's most saturated banking market. With almost 70 banks serving a population of 23 million, the streets of central Taipei are testament to this cut-throat environment, where there are often three or more banks directly facing each other. Given the intense competition to offer the best rates, services and quality, Taiwan's banks have among the lowest return on equity, return on assets, dividend yields and interest margins in Asia.
Against this backdrop, the imminent signing of an Economic Co-operation Framework Agreement (ECFA) between China and Taiwan, a manifestation of warmer cross-strait ties between the two countries, has generated much excitement among local industry chiefs and politicians alike. The agreement is expected to facilitate a huge increase in cross-border economic interaction, cutting tariffs and red tape on hundreds of products, including financial services, and potentially increasing the value of trade between the two countries to $100bn annually. The recent explosion in cross-strait tourism and the inauguration of direct flights between the two economies gives an idea of Taiwan's potential: according to official statistics, 181,000 Mainland Chinese visited the island in April 2010, up from barely 35,000 at the end of 2008.
