The Financial Supervisory Commission (FSC) yesterday agreed to give positive consideration to requests by domestic banks to embark on more aggressive lending in the Chinese market.
FSC Chairman William Tseng (曾銘宗) made the statements after a closed-door meeting with top executives from the nation’s 16 financial holding companies in a show of goodwill.
“The commission plans to ease lending regulations in two stages, allowing local banks more room to grow their business in China,” Tseng told a media briefing.
Current rules limit investment in China by Taiwanese banks to 15 percent of their net worth, and the recently installed FSC chairman indicated the commission’s willingness to ditch this constraint.
The commission intends to raise the limit to 40 percent of the banks’ capital in the first stage and extend the investment further to 40 percent of their net worth in the second phase, Tseng said.
The planned relaxations would allow local banks to invest an extra NT$250 billion (US$8.36 billion) in China initially and later increase the amount to NT$650 billion, FSC Banking Bureau Director-General Kuei Hsien-nung (桂先農) said.
The first-stage deregulation may take effect soon after the legislature approves the cross-strait service trade agreement, Kuei said, adding that the second-stage easing may take longer as it requires legal revisions.
As for exposure to China, Kuei said the commission has to discuss the issue with other government agencies that also have jurisdiction over cross-strait affairs.
Present rules cap overall exposures by domestic banks to China to 100 percent of their net worth, and the sector is suggesting a ceiling of 200 percent or removing syndicated loans from the equation.
Some banks have pushed for replacing the net worth from the previous “year” with the preceding “quarter” given the latter’s higher base, while others have recommended exempting loans from the limit if they have a guarantee from one of the world’s top 100 banks.
China’s lending business generates higher yields due to higher borrowing costs and strong loan demand.
So far, Taiwanese banks have an average exposure of 47 percent in China with the ratio standing at 80 percent to 90 percent for only a few.
The commission also promised to loosen regulations governing offshore banking units so the virtual banking divisions may offer any services and products that are not specifically banned, Kuei said.
The deregulation plan is intended to help advance the government’s free economic pilot zones, but most banks have raised doubts on its potential to boost the nation’s banking industry.