The Financial Supervisory Commission (FSC) is weighing plans to ease lending restrictions on securities firms, as a shortage of funding for margin-style loans fuels industry calls for greater flexibility — but any relaxation is likely to come with stricter capital conditions.
The FSC is considering raising the cap on nonrestricted purpose lending — loans brokers extend to investors for general use — from four times net worth to as much as five or six times, people familiar with the matter said.
A framework could be finalized later this month.
Photo: Kelson Wang, Taipei Times
The move would not be a straightforward loosening. Brokers seeking higher lending limits would need to commit to capital injections within a specified timeframe and meet minimum capital adequacy requirements, a key measure of financial strength that assesses whether firms hold sufficient buffers to absorb potential losses.
Based on the industry’s net worth of about NT$757 billion (US$23.92 billion) at the end of last year, the proposed adjustment could unlock an additional NT$757 billion to NT$1.51 trillion in lending capacity, potentially providing fresh liquidity to investors — assuming firms participate fully and meet regulatory thresholds.
The discussions follow meetings between the Taiwan Stock Exchange, the Securities Firms Association and the FSC’s Securities and Futures Bureau, where broader adjustments to leverage rules were also explored.
The potential policy shift aligns with the FSC’s broader ambition to develop Taiwan into a regional asset management hub by expanding the capacity of domestic financial institutions, but regulators remain cautious about loosening constraints without safeguards.
Despite a strong equity market rally last month that pushed the benchmark TAIEX above the 40,000 points, the industry’s net worth has increased only modestly. Officials have noted that much of the sector’s earnings have been distributed as cash dividends rather than retained to strengthen balance sheets.
That trend has drawn scrutiny from the FSC, which is increasingly tying any relaxation of lending limits to commitments from major shareholders to inject new capital.
Industry conditions are also uneven. While some larger brokers maintain strong balance sheets, smaller firms have expanded nonrestricted lending aggressively, despite limited capital bases, raising concerns over risk management and credit quality.
Regulators have internally said that expanding loan volumes should not come at the expense of asset quality. Instead, brokers are being encouraged to allocate capital more selectively, focusing on borrowers with stronger repayment capacity to reduce the risk of bad debts in the event of a market downturn.
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