Mon, Jun 20, 2016 - Page 13 News List

Banks’ exposure to China drops further

PAID OFF:A fall in lending to China is evidence that warnings over lending to China, even to Taiwanese businesspeople, has been heeded, the finance watchdog said

Staff writer, with CNA

Lending extended by Taiwanese banks to China declined as of the end of March, marking the sixth consecutive quarter of decline at a time when the Taiwanese government is asking the banking sector to tighten their risk control on their exposure to the Chinese market, the central bank said.

Despite the decline, the bank said that China retained the title as the second-largest debtor to Taiwan on a direct risk basis, trailing the US on the back of a fall in Taiwanese banks’ exposure.

As of the end of March, outstanding international claims by Taiwanese banks to China on a direct risk basis stood at about US$43.2 billion, down US$6 billion, or 12.12 percent, from the end of December last year, the statistics showed.

Taiwan’s exposure to the US on a direct risk basis stood at US$64.59 billion as of the end of March, keeping Washington as the largest debtor to Taipei, the data showed.

On an ultimate risk basis, which calculates a nation’s consolidated debts after risk transfers, China remained the largest debtor to Taiwan, surpassing the US as of the end of March.

Taiwanese banks’ lending to China on an ultimate risk basis reached US$62.1 billion, down US$2.9 billion, or 4.39 percent, from a quarter earlier, but the figure surpassed the US$61.9 billion in Taiwan’s exposure to the US, the statistics showed.

Compared with a peak recorded at the end of September 2014, Taiwan’s exposure to China on an ultimate basis as of the end of March fell about US$32 billion, according to the data.

The central bank said the fall in Taiwan’s lending to China showed that the efforts made by the Financial Supervisory Commission have paid off.

The commission has urged banks to turn prudent when they extend loans to China-based borrowers, including Taiwanese businesspeople there, in a bid to prevent unwanted risks, especially as China’s economy slows down.

In terms of total outstanding international claims by Taiwanese banks, as of the end of March, the amount on a direct risk basis reached US$355.6 billion, up US$11 billion, or 3.2 percent, from a quarter earlier.

On an ultimate basis, Taiwan’s total international claims rose US$12.7 billion, or 3.95 percent, from a quarter earlier to US$334 billion.

On a direct risk basis, after the US and China, Hong Kong and Luxembourg ranked as the third and the fourth-largest debtors to Taiwanese banks as Taiwanese banks extended US$34.81 billion and US$34.03 billion to them respectively, as of the end of March.

Japan came in fifth with US$31.75 billion debt, followed by the UK with US$17.84 billion, the British West Indies with US$14.04 billion, Singapore with US$11.82 billion, the Cayman Islands with US$11.67 billion and Australia with US$11.15 billion.

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