Taiwan should allow more regulatory flexibility and encourage more international issuers to tap the bond market as part of its attempt to build an offshore yuan trading hub, Barclays Taiwan chief executive Cosmas Lu (陸怡豪) said on Tuesday.
“The success of the undertaking lies in the pace of regulatory easing,” Lu said, referring to the offshore yuan business, particularly the development of Formosa bonds (寶島債).
The British financial services provider, whose clients include Hon Hai Precision Industry Co (鴻海精密), Hermes Microvision Inc (漢微科), Tingyi (Cayman Islands) Holding Corp (康師傅控股) and MediaTek Inc (聯發科), said scores of foreign issuers from different sectors have voiced an interest in raising funds in Taiwan if regulators remove legal barriers.
Compared with Hong Kong and Singapore, Taiwan has a larger population and higher excess savings, making it well-positioned to develop Formosa bonds into a premier capital market, Lu said.
Taiwanese regulators should follow Hong Kong’s example and adopt a two-track issuance mechanism that provides individual investors better protection than their institutional counterparts, since the latter group is better equipped in terms of information and professional know-how, Lu said.
The Financial Supervisory Commission (FSC) should also allow pre-approved bond issues instead of “issue by issue” approval, which is time-consuming and unnecessary, Lu said, noting that syndicated loans are not subject to similar scrutiny.
In addition, the FSC should axe fixed underwriting requirements and allow offerings on a best-efforts basis to encourage foreign issuers to tap the onshore market through local banks and securities houses, Lu said.
Barclays Taiwan also wants more flexibility in rating requirements or alternative criteria to ratings, saying ratings are not needed when issuing bonds in Hong Kong.
“Other measures, such as capital adequacy levels, may better gauge issuers’ financial health,” Lu said.
The European Chamber of Commerce Taipei and the American Chamber of Commerce in Taipei share the view that there is a need for regulatory easing and will include the plea in their position papers this year, Lu said.