The central bank said it would impose a 5 percent reserve requirement on foreign currency deposits, a move bankers said is aimed at deterring savers from switching their funds out of Taiwan dollars.
The move, which the central bank said would bring its reserve requirements in line with those in Japan and the EU, came after the Taiwan dollar fell 0.1 percent to NT$33.112 against the US dollar. The currency is down 4.5 percent in the year to date, and the central bank admitted that foreign currency savings are rising as a proportion of total savings.
Under the rule, banks receiving foreign currency deposits would have to place 5 percent of the funds with the Central Bank of China as reserves. Interest on such reserves is normally lower than market interest rates, so the move should lower the return -- and the attractiveness -- of foreign currency deposits.
``It's to try to deter people who put money in foreign currency deposits,'' said Chen Chi-chu (陳季筑), executive vice president at the International Commercial Bank of China (中國國際商業銀行). He said the move probably won't work, as savers could move their funds offshore to circumvent the rules.
RSS