The credit ratings of a number of the nation's commercial banks were disclosed to the general public for the first time this week -- but that's only half of the story.
The credit ratings for nearly half of the banks nationwide are still unknown and have yet to be disclosed.
Credit ratings for 27 commercial banks were disclosed Thursday. Because these banks' credit ratings reached a certain standard, they are qualified to accept deposits from mutual fund companies, according to new regulations adopted by the Securities and Futures Commission (
But of the nation's 52 commercial banks, 25 have not been rated or have refused to disclose their rating results. Among them, roughly 15 banks have been disqualified from accepting fund deposits because of their low ratings, sources said.
After a credit cooperative in southern Taiwan went bankrupt early last year -- generating losses for an already ailing fund company -- the SFC issued a formal directive last year requesting that deposits be placed only with banks that have ratings above "BBB-."
The directive becomes effective at the end of this year, and the nation's 32 fund companies must transfer their fund assets from a dozen disqualified banks to those that are qualified.
Currently, the fund industry manages about NT$700 billion in bond funds, which are invested in bonds, short-term notes and bank time deposits.
The total for bank time deposits comes to NT$315 billion, or 45 percent of the industry's total bond fund assets.
Unless they can get qualified credit ratings before the end of this year, credit cooperatives and certain commercial banks will lose a chunk of their business. A number of issues are involved. Primarily, a credit ratings disclosure system has yet to be established.
"In the US, the Securities Exchange Commission [SEC] requires bond issuers to disclose their credit ratings before they can raise money in the bond market," said Xavier Chavee of Taiwan Ratings Corp (
"The game rules have not been established in Taiwan, which has deterred the development of a credit ratings system," said Larry Liao (廖瑞雄), a fund manager of ING-CHB Securities Investment Trust.
The SFC has been promoting credit ratings in the last decade. By requiring mutual funds to place deposits just with qualified banks, the agency's latest move can be seen as forcing the banks' hands.
Yet more than ten commercial banks have not been rated by any credit rating agencies and credit cooperatives are not required to participate, analysts said.
"Since credit ratings are still in the early stage in Taiwan, it's not a generally accepted practice for the banking industry, nor do they act as a risk indicator for depositors and investors yet," said Norman Yin , professor of Cheng-chi University. "Once the financial market takes the credit rating seriously, things will be different. Credit rating agencies will be powerful enough to say `no' to clients who want to keep secret their rating results."
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