TAIPEI, June 16 (Reuters) - Taiwan’s financial regulator is getting local banks to lower their exposure to China by clamping down on the amount of yuan business they can conduct, two people familiar with the matter told Reuters.
The move comes as concerns over credit and investment quality in China increases with the slowdown of the Chinese economy.
A Taiwan bank can conduct yuan business, including lending and investment, in an amount not exceeding the bank’s net value, according to Financial Supervisory Commission rules.
However, recently there has been “an understanding” that banks should limit their exposure to China to 0.7 times a bank’s net value, according to one Taiwanese banker, who spoke on the condition of anonymity due to the sensitivity of the issue.
“There are not many banks who exceed 0.7 (times net value) now,” said a Taiwanese regulatory official, who declined to be named. “We always monitor the yuan business situation.”
Asked if the FSC is telling banks to lower their China exposure, the regulator’s chief secretary Wu Kuei-mao said he was not aware of such a move.
According to FSC data, at the end of the first quarter the China exposure of banking units of Sinopac Financial Holdings Co , Mega Financial Holding Co and CTBC Financial Holding Co was more than 0.7 times their net value.
At of the end of the first quarter, the Taiwan banking industry’s exposure to China totaled T$1.618 trillion ($50 billion), equivalent to 0.56 times the industry’s net value, FSC data showed.
Taiwanese banks that traditionally lend to companies from the island with operations on the mainland are seeking fresh business amid overcrowding at home, prompting the island’s financial regulator to step up its risk management measures.
$1 = 32.3590 Taiwan dollars Reporting by Emily Chan; Writing by J.R. Wu; Editing by Richard Borsuk