Print

Mail

wiki links

Regulator to cut bond fund risks

Chunghwa Post Co (中華郵政) and the nation's insurance companies will assist the Financial Supervisory Commission in backing bond funds to reduce liquidity risks.

The move is part of seven measures aimed at preventing a repeat of investor withdrawals in July that forced United Securities Investment Trust Corp (聯合投信) to halt redemptions of its bond funds when it ran out of cash, said Commissioner Lee Shyan-yuan (李賢源), who's overseeing the proposal at the regulator.

"We want to fully block liquidity risks in bond funds, giving investors full confidence," Lee said in a telephone inter-view yesterday.

The measures will take effect immediately, he said.

Taiwan's bond funds had a combined size of NT$2.1 trillion at the end of last month, accounting for 77 percent of total mutual funds, according to the Securities Investment Trust and Consulting Association, an industry group. The NT$2.1 trillion was down from a peak of NT$2.4 trillion in May, after United Securities halted redemptions of three bond funds, Lee said.

Fubon Securities Investment Trust Co (富邦投信) took over the three funds in July. Jih Sun Investment Trust Co (日盛投信) later took over another two funds from United Securities.

Chunghwa Post and the insurance companies have about NT$950 billion (US$28 billion) of funds which can be used to take over an estimated NT$400 billion of illiquid assets in bond funds, Lee said.

The new measures also include a freeze in new bond fund issues by existing asset management companies. Issues by new asset-management companies will still be approved, Lee told the Taipei Times.

Institutional investors such as insurance companies are the main investors in bond funds.
This story has been viewed 2704 times.