Fri, Aug 10, 2007 - Page 12 News List

Investments in US subprime market total NT$71 billion


The nation's financial institutions hold about NT$71 billion (US$2.16 billion) in investments linked to US subprime mortgage-related instruments, the Financial Supervisory Commision said yesterday.

Among them, nine Taiwanese life insurers hold about NT$30 billion in subprime-related products, while three property insurers have invested about NT$188 million in such subprime loans, the commission said in a statement.

In addition, 16 of the nation's 42 banks hold around NT$40.4 billion in investments linked to subprime mortgages, while securities investment trust firms have lost US$19.5 million through mutual funds, the statement said.

These figures, disclosed yesterday by the commission's spokesman and vice chairwoman Susan Chang (張秀蓮) at a press briefing, came amid concern that US mortgage losses may spread to domestic financial institutions following a weeklong investigation by the commission.

The financial regulator didn't give details on the investments by Taiwanese insurers, but it revealed that two insurers had booked losses from its holdings in subprime-related securities.

This includes a loss of NT$447 million by Taiwan Life Insurance Co (台灣人壽) and a loss of NT$2.38 million by Mingtai Fire & Marine Insurance Co (明台產險), according to the commission.

The collective losses of around NT$450 million accounted for just 0.0225 percent of the two insurers' total overseas investment, or NT$2 trillion, the commission said.

Other local insurers, however, have not yet booked potential losses for their holdings of similar instruments, it added.

As for Taiwanese banks, the commission said that only a limited number of the lenders have direct exposure to US subprime mortgage-related securities, while most others are exposed to subprime mortgages through securitized financial products or corporate bonds issued by the relevant subprime loan providers.

"Given that there haven't been any defaults and the interest repayments remain normal, the potential losses should be limited," the commission said.

Among the 16 local lenders is Mega Financial Holding Co (兆豐金控), the nation's second-largest financial-services company, Chang said, declining to identify the other firms.

Mega Financial has invested in NT$150 million worth of securities linked to subprime mortgages, Simon Dzeng (曾垂紀), executive vice president, said on Aug. 7.

While there are wealth management products sold by five local lenders that are linked to the subprime mortgages, the commission said the dollar volume of these instruments was not as huge as expected at NT$4.1 billion and should have a limited impact on investors.

On Aug. 7, Taiwan Ratings Corp (中華信評) said its ratings on Taiwan Life Insurance, Cathay Life Insurance Co (國泰人壽) and Shin Kong Life Insurance Co (新光人壽) were not immediately affected by the insurers' disclosed exposure to US subprime loans.

Taiwan Ratings said that it didn't expect potential credit losses to materially erode the three insurers' capital bases based on their sound profitability and strong capitalization, the local arm of Standard and Poor's said in a statement.

Additional reporting by Bloomberg

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