TAIPEI Sept. 17(AP) -- The failed sale of Taiwan Business Bank because of demands by its labor union has dealt a blow to the government's efforts to consolidate the island's unwieldy banking sector, analysts say.

Minister of Finance Lin Chuan said Wednesday the deal faltered after the investor that was interested in acquiring Taiwan Business Bank _ the island's ninth-largest lender by assets _ withdrew from the bidding because of additional demands by the bank's labor union.

"People are now worried how the government is going to cut down the number of banks going forward," said Renee Tsai, a KGI Securities banking analyst.

Taiwan has 48 banks, none of which has a market share of more than 10 percent, and the government controls 50 to 60 percent of the island's banking assets. It has been keen to put more of those assets into private hands and create a major regional player through encouraging mergers and acquisitions.

The government owns more than 40 percent of Taiwan Business Bank.

"The investor said giving up on the deal was probably better for their shareholders," Lin told reporters.

Taiwan's media widely speculated the mystery investor was E.Sun Financial Holding Co., though neither the company nor the government ever confirmed this.

During Wednesday's negotiations on the sale, Taiwan Business Bank's union, which had held a four-day strike to protest the deal, made new demands, Lin said, without disclosing details.

Lee Hong-yen, a labor union leader, said the disagreement centered on an early retirement program.

"To be honest, I don't care about the benefits, what I want is to make sure I still have my job tomorrow," Lee said.

Jesse Wang, BNP Paribas Securities' head of research, called the outcome of the sale attempt "a total failure."

"This is very disappointing, and will have serious implications for future mergers and acquisitions because it's going to make privatization of other banks very difficult, if not impossible," Wang said.

KGI's Tsai agreed, saying unions at other government-controlled banks may now pursue tougher action to pre-empt takeovers.

Lin didn't say if the government will continue to seek other buyers for Taiwan Business Bank.

The minister said the government's plans to merge Taiwan Cooperative Bank with Farmers Bank of China, and to sell various divisions of the Central Trust of China to different buyers, remain on track.

Lin acknowledged though that the government needed to improve the presentation of its policies.

"Apparently we have failed to convince the public of the importance of financial reforms. But from a personal point of view, I would say we have to continue to try our best to push forward the plans," the minister said.