Global redemption pressures in the private credit market have forced several major funds to restrict withdrawals or suspend redemptions, but Taiwan’s exposure remains limited and manageable, the regulator said.
The Financial Supervisory Commission (FSC) on Thursday said that as of the end of February, only a single private credit product sold by a Taiwanese bank was linked to the troubled global funds.
The product was offered exclusively to offshore clients through the bank’s offshore banking unit, with total exposure of approximately NT$250 million (US$7.82 million). No customer complaints have been filed, the FSC said.
Photo: CNA
FSC Banking Bureau Deputy Director-General Chang Chia-kui (張嘉魁) said that domestic banks are prohibited from investing directly in private funds, insulating the banking sector from direct exposure.
On the distribution side, only one bank sold a single product to offshore clients, not domestic investors, Chang said, adding that overall risk remains controllable.
The global private credit stress was triggered by Blue Owl Capital, which halted redemptions in one of its products and moved to a capital-return mechanism.
That set off a chain reaction, prompting redemption requests for Blackstone’s flagship BCRED fund, which quickly reached its redemption cap. Other funds managed by BlackRock, Cliffwater, and Morgan Stanley have since imposed similar withdrawal limits or delays.
At least seven international private credit funds have faced notable liquidity pressures, signaling that the stress is no longer confined to isolated cases.
Analysts attribute the turbulence to liquidity mismatches and high interest rate pressures. The stress in the global private credit market emerged mainly from structural weaknesses that became visible under prolonged high interest rates and tighter liquidity conditions.
Most private credit loans carry floating rates, increasing borrowers’ interest costs and straining corporate cash flows, which elevates default risks.
Structural mismatches have exacerbated the situation. Many funds finance long-term loans with short-term capital, leaving them unable to meet a surge in redemptions.
Managers often respond by imposing withdrawal limits, further intensifying market anxiety.
Additional factors include loosened underwriting standards during the sector’s rapid growth, which left some loans with weaker credit quality, and opaque valuation practices.
Unlike publicly traded bonds, fund managers typically determine asset valuations internally, allowing abrupt price adjustments following credit events.
Despite global turbulence, the local banking system remains largely insulated, with minimal exposure and manageable risks, FSC data showed.
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