The central bank has suggested easing overseas investment rules for domestic life insurance companies to create demand for the US dollar and take some appreciation pressure off the New Taiwan dollar.
The bank made the veiled plea in a statement on Sunday after local media last week made known its suggestion to the Financial Supervisory Commission (FSC) in a letter that was met with a cold shoulder.
“Japan and South Korea have removed or raised investment limits for their life insurers so they can pursue better yields, a trend that has gained prevalence,” the central bank said in the statement.
Photo: Billy H.C. Kwok, Bloomberg
Insurance companies are searching for global investment tools that pay better yields to digest idle liquidity amid a global low-interest-rate environment, the bank said.
Deregulation is particularly warranted after global central banks cut interest rates to zero or into negative territory this year to mitigate the pain of the COVID-19 pandemic, it said.
Taiwan, with a resilient economy and less drastic monetary policy, has attracted a massive influx of capital to buy local technology shares. That has caused volatility for the local currency and pushed up property prices, which is unfavorable for the stability of the nation’s financial system, the bank said.
Looser regulations for foreign currency-based insurance policies, for example, would give local insurers more leeway in planning asset allocations and create demand for foreign currencies, it said.
The FSC could do so by excluding foreign-currency insurance policies from the calculation of foreign investment limits for domestic insurers, the central bank said.
Insurance companies, pension funds and fund houses should actively take advantage of idle local capital and direct it to global investment opportunities to improve their businesses and benefit local customers, it said.
Taiwan’s fast-aging society would suggest strong demand for wealth management products to meet retirement and inheritance needs, the bank said.
It takes coordination among government agencies to rein in rising property prices and to stabilize the financial system, it added.
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