Fri, Aug 02, 2024 page12

• Taiwan regulator tells banks beware of China

  MANAGING RISK: The nation’s financial institutions have gradually cut exposure to China’s economy, as part of efforts to diversify amid US-China tensions

  • Bloomberg
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  Taiwan’s financial regulator has cautioned workers at its banks operating in China to be mindful of their comments, following Beijing’s decision to expand laws that threaten “separatists” from Taiwan with the death penalty.

  “We have reminded our banks in China to care about their staff, and pay attention to their comments and behavior,” Financial Supervisory Commission Chairman Peng Jin-lung (彭金隆) said in an interview in Taipei on Wednesday.

  “The regulator will look into it case by case if there is an issue,” he said.

  

  Financial Supervisory Commission Chairman Peng Jin-lung during an interview in Taipei on Wednesday.

  Photo: Bloomberg, An Rong Xu

  Taiwan’s financial institutions have gradually cut exposure to the world’s second-biggest economy to diversify amid US-China tensions and the COVID-19 pandemic, Peng said, adding that their investment in China has continued to drop as businesses are very sensitive.

  Taiwanese banks’ exposure to China dropped to just 21 percent of their net value this year, from a peak of about 70 percent in 2014, Peng said.

  However, it is unlikely that exposure would fall to zero, because financial institutions still need to serve Taiwanese businesses operating in the country.

  To manage the risk of operating in China, the reserve requirement for loans in China is 50 percent more than for those in Taiwan, he said, adding that the non-performing loan ratios of the nation’s banks in China are very low.

  The regulator aims to build Taiwan as one of Asia’s asset management centers, and plans to further ease rules on investments and products for wealth management business, after allowing some banks to sell structured products to their high-net-worth clients, he said.

  “Many international asset management companies have offices in Taiwan, such as Blackrock, and we hope they can expand their local team as Taiwan has many investment opportunities, such as AI [artificial intelligence] and technology,” Peng said. “We hope they can innovate new products in Taiwan.”

  Total assets under management in Taiwan amount to about NT$120 trillion (US$3.66 trillion), including bank deposits and insurance funds, Peng said.

  The government plans to prioritize retaining the wealth of its citizens locally, along with attracting overseas funds when building Taiwan as an asset management center, he said, adding that the impact of geopolitical risks would be smaller that way.

  “Just like Taiwan’s property market is booming, will foreigners dare to buy property?” Peng asked rhetorically. “Probably not, but it doesn’t make a difference to locals. We are practical and we will focus on retaining the local wealth.”
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