Four local banks with exposure to NT$5 billion (US$178.44 million) in Russian bonds expect more losses after the bonds’ ratings were downgraded due to sanctions against Russia following its invasion of Ukraine, the Financial Supervisory Commission (FSC) said yesterday.
Some of the Russian bonds held by local banks are Russian government bonds, whose yields rose from less than 5 percent in January to 19 percent last month.
As yields and bond prices move in opposite directions, rising yields would lower the prices of bonds.
If the banks determine that the Russian bonds are likely to default, they would need to book more losses, Banking Bureau Chief Secretary Phil Tong (童政彰) told a news conference.
Banks in Taiwan evaluate their financial assets on a monthly basis.
The changes in valuation would affect banks’ net value, and some banks told the commission that their board of directors would discuss the valuation of the Russian bonds soon, Tong said, adding that the commission would monitor the banks’ potential losses.
To cap the potential damage to its economy, the Russian central bank on Monday announced a ban on foreign investors selling Russian securities.
Taiwanese life insurers, who hold NT$138.2 billion in Russian bonds, tend to hold the assets as long-term investments, Insurance Bureau Deputy Director-General Chang Yu-hui (張玉輝) said, adding that many of them have no plan to buy or sell Russian bonds in the short term.
As the bonds are denominated in US dollars, their valuation would not be affected by the plummeting Russian ruble, Chang said.
Life insurers’ investment in Russian bonds accounts for only 0.46 percent of their total foreign investments, he added.
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