The nation’s financial risks remain low, but rising housing prices, lending risks in banks’ overseas branches and stock market volatility need to be monitored, the Taiwan Academy of Banking and Finance (TABF, 台灣金融研訓院) said yesterday at the launch of its Taiwan Financial Risk Index.
The index fell to 98.11 last month, from 98.71 a month earlier and 101.28 in March, indicating that financial risks had been declining since the COVID-19 outbreak, TABF president Hank Huang (黃崇哲) told a news conference in Taipei.
However, it has not returned to pre-pandemic levels, with the index standing at 97.85 in January, Huang said.
Photo: Wu Chia-ying, Taipei Times
The nation’s first self-developed financial risk indicator, the index is composed of four sub-indices: asset valuation risk, systemic stress in the financial sector, potential instability in the non-financial sector, and spillover and contagion risks.
A reading of below 100 indicates low financial risks, while a reading above the threshold suggests higher risks, the nonprofit organization said.
The institute spent two years compiling the index based on the European Central Bank’s financial stability risk index.
It helps regulators enhance supervision and benefits academic research, Financial Supervisory Commission Chairman Thomas Huang (黃天牧) said.
A closer look at the index shows that asset valuation risk, which measures volatility in the stock market, real-estate market and corporate debt, was 101.63 last month, down from 103.4 in October.
However, it remained above 100, reflecting an overheated property market, with rising housing prices and commercial office rents, the institute said.
Systemic stress in the financial sector — calculated based on banks’ loan-to-deposit ratio, capital adequacy, non-performing loan ratio and coverage ratio — fell from 95.4 to 94.2, while stability in the non-financial sector — based on banks’ corporate loans and investment in corporate bonds — also slid from 93.6 to 92.9, it said.
However, spillover and contagion risks climbed to 104.3 from 103.4, ending a three-month decline, as more countries saw a spike in COVID-19 cases, boosting the risks for loans by banks’ overseas branches, TABF said.
Still, it was lower than the peak of 113.2 in March, the data showed.
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