The Financial Supervisory Commission (FSC) yesterday said that it is drafting a comprehensive stress test to gauge domestic banks’ ability to withstand wide swings in variables affecting risk exposure.
Unlike previous tests evaluating banks’ resilience against specific risk exposures, the latest test is to encompass macroeconomic factors such as the nation’s economic growth rate, jobless rate, the value of the New Taiwan dollar and interest rates.
Domestic banks have passed a number of stress tests simulating inclement conditions in specific segments, and have met the commission’s requirements for financial ratios.
In 2010, banks demonstrated that they were able to weather slowing GDP growth, rising unemployment and a cooling housing market and had managed to contain impacts to their financial conditions at the range required by the commission.
Stress tests on banks’ exposure to domestic home loans and loans by their China-based lending operations were carried out in 2014 and last year respectively.
The nation’s banks passed both tests, showing that they were able to contain impacts to their capital adequacy and tier 1 ratios at a level deemed manageable by the commission.
A Tier 1 capital ratio measures a bank’s financial strength based on the sum of its core equity capital and total risk-weighted assets, while capital adequacy determines the financial strength of a company.
The commission is reviewing the outcome of a stress test on banks’ exposure to yuan-linked target redemption forward (TRF) contracts that was conducted last month.
While analysts are in agreement that the worst of the concerns about TRF contracts have passed, as a majority of the contracts expired as of the end of last month, they said unexpected swings in the yuan’s strength could still cause significant losses for banks.
The FSC’s TRF stress test simulating a weakened yuan of 6.8 per US dollar was deemed inadequate, as the yuan is expected to fall to 7.5 against the greenback by the end of this year, Daiwa Capital Markets analyst Christie Chien (簡民惠) said in a client note last week.
Since the Chinese central bank devalued the yuan in August last year, TRFs have caused widespread losses for investors, while banks are facing rising exposure to the instrument’s refundable deposit against potential defaults by their clients.
Banks have also lost highly profitable items in their product mix as sentiments toward the troubled derivative soured.
PROBE
In related news, the commission said that it has asked its Financial Examination Bureau to probe allegations by New Power Party Legislator Huang Kuo-chang (黃國昌) that a number of banks assisted their clients to produce false financial statements and set up offshore accounts in a bid to promote TRF sales.
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) secured a record 70.2 percent share of the global foundry business in the second quarter, up from 67.6 percent the previous quarter, and continued widening its lead over second-placed Samsung Electronics Co, TrendForce Corp (集邦科技) said on Monday. TSMC posted US$30.24 billion in sales in the April-to-June period, up 18.5 percent from the previous quarter, driven by major smartphone customers entering their ramp-up cycle and robust demand for artificial intelligence chips, laptops and PCs, which boosted wafer shipments and average selling prices, TrendForce said in a report. Samsung’s sales also grew in the second quarter, up
LIMITED IMPACT: Investor confidence was likely sustained by its relatively small exposure to the Chinese market, as only less advanced chips are made in Nanjing Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) saw its stock price close steady yesterday in a sign that the loss of the validated end user (VEU) status for its Nanjing, China, fab should have a mild impact on the world’s biggest contract chipmaker financially and technologically. Media reports about the waiver loss sent TSMC down 1.29 percent during the early trading session yesterday, but the stock soon regained strength and ended at NT$1,160, unchanged from Tuesday. Investors’ confidence in TSMC was likely built on its relatively small exposure to the Chinese market, as Chinese customers contributed about 9 percent to TSMC’s revenue last
With this year’s Semicon Taiwan trade show set to kick off on Wednesday, market attention has turned to the mass production of advanced packaging technologies and capacity expansion in Taiwan and the US. With traditional scaling reaching physical limits, heterogeneous integration and packaging technologies have emerged as key solutions. Surging demand for artificial intelligence (AI), high-performance computing (HPC) and high-bandwidth memory (HBM) chips has put technologies such as chip-on-wafer-on-substrate (CoWoS), integrated fan-out (InFO), system on integrated chips (SoIC), 3D IC and fan-out panel-level packaging (FOPLP) at the center of semiconductor innovation, making them a major focus at this year’s trade show, according
DEBUT: The trade show is to feature 17 national pavilions, a new high for the event, including from Canada, Costa Rica, Lithuania, Sweden and Vietnam for the first time The Semicon Taiwan trade show, which opens on Wednesday, is expected to see a new high in the number of exhibitors and visitors from around the world, said its organizer, SEMI, which has described the annual event as the “Olympics of the semiconductor industry.” SEMI, which represents companies in the electronics manufacturing and design supply chain, and touts the annual exhibition as the most influential semiconductor trade show in the world, said more than 1,200 enterprises from 56 countries are to showcase their innovations across more than 4,100 booths, and that the event could attract 100,000 visitors. This year’s event features 17
RSS