The Financial Supervisory Commission (FSC) is planning to raise the ceiling on investment in foreign corporate bonds by local brokerage houses to cope with rising demand for Formosa bonds, or yuan-denominated bonds sold in Taiwan.
Under current rules, a Taiwanese broker cannot invest more than 10 percent of its net asset value in a single corporate bond product issued by a foreign firm.
The commission plans to raise the ceiling to 20 percent following requests and suggestions by local brokers. The easing may take effect as early as next week.
“Many brokerage houses have expressed a strong interest in investing in Formosa bonds,” Securities and Futures Bureau Deputy Head Wang Yung-hsin (王詠心) told a media briefing.
With local brokers’ aggregate net asset value totaling NT$480 billion (US$15.06 billion), the relaxation may free up an additional NT$48 billion for investment in foreign corporate bonds.
However, the investment cap on stocks issued by foreign companies is to remain at 10 percent of a broker’s net asset value.
The commission may also adjust downward the amount of guaranty bond a brokerage house’s branch has to deposit to NT$5 million — from NT$10 million at present — following improvements in brokerage houses’ risk management.
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