The Financial Supervisory Commission (FSC) yesterday announced stimulus initiatives aimed at freeing capital and improving utilization to address a persisting slump in stock market turnover.
The commission said that individuals and companies may use beneficiary rights of trust services as collateral to obtain secured loans.
Such beneficiary rights issued by one financial firm may be used to apply for loans by another financial firm, the commission added.
“About NT$500 billion [US$15.3 billion] in fresh funding is expected to be injected into the market following the regulatory changes,” Banking Bureau Director-General Austin Chan (詹庭禎) said.
About one-third of clients using specialized pecuniary trusts are seeking loans with total assets managed by trust services amounting to about NT$3.2 trillion by the end of the second quarter, Chan said.
NT$2.25 trillion in underlying assets managed by pecuniary trust services that can be used as collateral for loans are allocated to offshore funds, followed by conventional foreign-issued bonds at NT$352.99 billion, according to the commission’s data.
“We are positive that a significant portion of funds obtained through such beneficiary rights-backed loans will flow into the local bourse,” Chan said.
In addition, about NT$130 billion in capital is expected to be released to boost daily market turnover, as the commission is considering easing laws governing stock market investments by local commercial banks.
According to the commission’s plan, commercial banks may invest up to 30 percent of their net worth in the local stock market, up from 25 percent. The amendments are expected to be completed no later than two from now, the commission said.
The commission said that the deregulation is designed to offer more flexibility in investment options and improved capital utilization for commercial banks.
A commission official, who declined to be named, said that the securities investment portfolio held by domestic banks is less than NT$300 billion, far below its mandated cap of NT$630 billion.
However, five or six local banks, including Taipei Fubon Bank (台北富邦銀行), Shanghai Commercial and Savings Bank (上海銀行) and Union Bank of Taiwan (聯邦銀行), are approaching their 25 percent investment ceiling, the official said.
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