Taipei,Sept.17,2012(CENS)--In order to expand the scale of investments and credit extension by Taiwanese banks in mainland China,the Financial Supervisory Commission(FSC)plans to exclude a number of business items from the scope of the ceiling for their total risk exposure in China.
According to the existing regulation,the total risk exposure of domestic banks in mainland China,including credit extension,investments,and deposits of their funds,cannot exceed one time their book values.
Thanks to their rapid business development,some banks have approached the ceiling in their total risk exposure in mainland China and their business development in the Chinese market will stall,if the ceiling cannot be relaxed.
As a result,the FSC is considering excluding a number of business items from the scope of total risk exposure,including investments and credit extension by their overseas subsidiaries and the financial investments by banks.
Financial investments feature short term and large-scale fluctuation in value and therefore can be excluded from the scope.The scale of financial investments by domestic banks will expand considerably,since following the setup of cross-Taiwan Strait currency clearance mechanism,designated banking units(DBU)will be able to invest in mainland Chinese securities.
Meanwhile,in calculating the amount of total risk exposure,the amount of credit extension is based on the credit line,rather than actually utilized amount.The switch to the latter in the calculation of risk-exposure amount can greatly enhance the business scale which can be undertaken by domestic banks.
According to the data of the FSC,total risk exposure of domestic banks in mainland China has been expanding rapidly and has approached 43%of their total book value on average.Based on the total book value of NT$2.27 trillion of domestic banks at the end of June,the outstanding amount of business scale which can be engaged by domestic banks in mainland China reaches only NT$1 trillion now.
