Taiwan’s financial companies might not be significantly affected by US tax reforms, the Financial Supervisory Commission said yesterday, adding that the potential risks should be manageable.
The commission tallied the nation’s exposure to the US economy at about NT$6.89 trillion (US$232.84 billion), with the insurance sector having the greatest exposure at about NT$5.57 trillion.
At NT$1.09 trillion, banks have the next greatest exposure, while securities brokerages have invested about NT$90.59 billion in the US futures market and NT$234.6 billion in US equities and funds, the commission said.
The US tax overhaul could make it attractive for US companies to remit a larger portion of their overseas profits back into the US, boosting the country’s economy, Insurance Bureau Deputy Director-General Tsai Li-ling (蔡麗玲) said at a news conference.
While no immediate downsides have been identified, the bureau would ask insurers to bolster medium to long-term risk management measures, Tsai said.
As funds flow back into the US, the greenback is expected to begin strengthening, Tsai said, adding that at the same time, the tax cut would likely widen the deficit of the US federal budget, leading to higher US Treasuries yields, Tsai added.
These factors should benefit local life insurers, which grappled with foreign exchange-related losses in their massive overseas and US dollar-denominated investments as the New Taiwan dollar remained strong against the greenback throughout last year, Tsai said.
As domestic banks maintain strong asset quality and comply with capital requirements, lenders are expected to withstand shocks due to US tax reforms, Banking Bureau Deputy Director-General Sherri Chuang (莊琇媛) said.
Securities and Futures Bureau Deputy Director Chang Chen-shan (張振山) said that the US tax reforms have yet to cause a significant shift in fund allocation among foreign institutional investors, who last year recorded a net inflow of US$8.68 billion to Taiwan.
Meanwhile, on the back of a stronger NT dollar, collections of first-year premiums from US dollar-denominated insurance products in the first 10 months of last year surged to NT$11.93 billion to reach a new record, the commission said.
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