Mon, Sep 19, 2022 page12

• Financial firms dump stocks, flock to bonds

  INCREASING YIELDS: The rush for bonds has been driven by expectations of further rate hikes by the Fed and a global rout in stock markets, a government agency said

  • By Kao Shih-ching / Staff reporter
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  The nation’s financial institutions reduced their investments in local and foreign stocks by NT$597 billion (US$19 billion) in the first seven months of this year, while increasing their bond holdings by NT$1.5 trillion, the Financial Supervisory Commission said on Thursday.

  The moves came in response to global stock market routs and central bank rate hikes, the commission said.

  As the US Federal Reserve is expected to raise key interest rates by another 75 basis points this month, local financial institutions are likely to continue to increase their bond holdings and cut stock positions, it said.

  

  An electronic board displaying stock prices is pictured on a smartphone in Taipei on Friday.

  Photo: CNA

  Taiwanese banks, insurance companies and securities firms had NT$3.1 trillion of local and foreign stocks as of the end of July, down NT$597.1 billion from the end of last year, the commission said.

  Insurance companies in the first seven months invested NT$2.34 trillion in local and foreign stocks, compared with banks’ stock investment of NT$689.2 billion and securities firms’ NT$69 billion, it said.

  Financial institutions’ combined bond holdings totaled NT$27.24 trillion as of the end of July, up NT$1.49 trillion from the end of last year, as central banks’ rate hikes drove up bond yields.

  From January to July, life insurance companies increased their bond holdings by NT$904 billion, while banks boosted their holdings by NT$596.7 billion, the commission said.

  Separately on Tuesday, the commission said an inspection found that 20 financial institutions had contravened credit control measures for real-estate financing set by the commission and the central bank.

  The inspection of 10 banks, seven credit cooperatives and three bill financing companies found six major contraventions, the Financial Examination Bureau said.

  The severest violations were related to the requirements on loan-to-value (LTV) ratio and the calculation of capital adequacy ratio, it said.

  Three banks and one credit cooperative were found to have offered loans to home and land buyers with LTV ratios higher than the caps set by the central bank, the bureau said.

  Four banks were found to have used incorrect risk weighting to calculate their assets, which resulted in higher capital adequacy, it said.

  One bank and one credit cooperative were found to have lent funds to real-estate developers as working capital for salaries, rent and office overhead, whereas the funds were used in construction projects or for land purchases in contravention of banking rules, it said.

  The bureau has demanded that the financial institutions correct their practices, and submitted its findings to the Banking Bureau and the central bank, which are expected to mete out fines soon, it said.

  The commission said it has no plans to tighten regulations on real-estate financing by the end of this year and it expects financial companies to comply with the rules.
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