The central bank yesterday announced a spate of regulatory easing plans that would allow lenders to issue foreign currency-based negotiable certificates of deposit (NCDs) and more flexibility to diversify their product lines.
The upcoming deregulation is aimed at boosting yuan deposits and foreign currency-related investments in the local market, as the nation seeks to catch up with Hong Kong in its quest to become a regional financial hub.
“The central bank is revamping almost all rules governing foreign exchange to make the local market more friendly and competitive,” Cindy Huang (黃寶霞), the bank’s licensing section chief, told a media briefing.
Under the planned easing, banks may issue NCDs denominated in another currency, including the yuan, to meet business needs, Huang said.
Thirteen of the 18 foreign banks in the nation have voiced an interest in the business to give their customers more investment options, Huang said, citing a survey by the Bankers Association of the Republic of China (銀行公會).
The liberalization, which is expected to be implemented in the second half of the year, could significantly drive up yuan deposits in Taiwan, based on Hong Kong’s experience.
Yuan-based NCDs stood at 154.7 billion yuan (US$24.95 billion) last year, accounting for 30.62 percent of overall NCDs and 13 percent of yuan deposits in Hong Kong, Huang said.
That would suggest an extra NT$40 billion worth of yuan demand in Taiwan given deposits of 324.58 billion yuan at the end of last month, she said.
The central bank would also loosen rules governing foreign currency-based mutual funds and financial derivatives and treat the yuan like other foreign currencies.
That would allow yuan settlement in commodity, credit and other investment products except debts issued in China, Huang said, as Taiwan aims to limit exposure to the Chinese market.
“This is intended to protect local companies because Chinese companies are less transparent and accountable,” Huang said.
Institutional and professional investors would enjoy greater leeway so they can manage assets from home rather than channel funds abroad, the central bank said.
In addition, the Agricultural Bank of Taiwan (農業金庫) would be allowed to conduct foreign-exchange transactions after the deregulation.
Lenders may extend foreign-currency business hours and add foreign currency to their ATMs without prior approval, the central bank said.
The central bank is to hold meetings on Friday with bankers, securities houses and bills financing firms to discuss the details of the proposals.
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