Mon, May 21, 2012 - Page 12 News List

Banks’ exposure to PIIGS limited

Staff writer, with CNA

The exposure of Taiwan’s banks to the debts owned by Portugal, Ireland, Italy, Greece and Spain (the PIIGS countries) has fallen below NT$30 billion (US$1.01 billion), according to statistics compiled by the Financial Supervisory Commission (FSC).

As of the end of December last year, the banks’ exposure to the five European countries was about NT$30 billion and the amount has decreased because of prudent lending policies, the FSC said on Friday.

The local banking sector has never been a major lender to European countries, FSC officials said.

Since the debt crisis emerged in the eurozone, local banks have become very cautious about Europe’s financial health and have gradually cut back their lending and investments in the region, the officials said.

Government-invested banks, in particular, have made provisions to cover possible losses from loans to Italy, and the debt problems in the eurozone are expected to have limited impact on them, according to sources within the banks.

The comments came after the local bourse was hard hit by escalating fears over the debt situation in Europe earlier in the day.

The benchmark weighted index dropped 2.79 percent to 7,151.19 points on Friday, with foreign institutional investors selling NT$13.41 billion net worth of local shares amid concerns that Greece would exit the eurozone.

Due to the flight of foreign funds, the New Taiwan dollar extended its losses against the US dollar to close at NT$29.630, weakening from Thursday’s closing level of NT$29.560.

Greece announced that it would hold new elections next month, after it failed to form a coalition government following its May 6 parliamentary vote.

However, Fitch on Thursday downgraded Greece’s long-term credit rating to “CCC” from “B-,” saying the country might leave the eurozone if its elections fail to produce a government willing to stick to the austerity measures the country has promised.

Greece’s exit could have an impact on 16 other nations in the eurozone, sending the euro to a four-month low, Fitch added.

Yen Tzung-ta (嚴宗大), deputy governor of the Central Bank of the Republic of China, said: “The debt problem in the eurozone is not a new issue and the central bank has been keeping a close eye on the European financial situation.”

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