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Sovereign wealth funds influential: FSC chair

TAIPEI, Taiwan -- Sovereign wealth funds (SWFs) have generated huge discussions in the international markets and can be influential, said Sean Chen, chairman of the Financial Supervisory Commission (FSC), yesterday.

Chen made the statement while delivering a speech at an SWF forum held by the Taiwan Academy of Banking and Finance and the law school of National Chung Cheng University.

He said in October last year, the International Monetary Fund (IMF) announced recommendations on how SWFs may be operated. The Organization for Economic Cooperation and Development (OECD), meanwhile, has formulated rules on how SWFs may be invested in other countries. “As you can see, SWFs have generated much debate and discussions,” he said.

He further pointed out back in April 2008, the U.S. reached a consensus with Singapore and Abu Dhabi on how their SWFs may be invested in the United States. This consensus served as a prelude for the IMF's action in October, Chen said.

“SWFs have experienced exponential growth in the market. They exert great influence,” he said.

According to European Union statistics, by the end of 2008 SWFs across the world totalled US$1.5 trillion to US$2.5 trillion, and the figure is expected to inflate to US$12 trillion by 2015.

A sovereign wealth fund is a state-owned fund composed of financial assets such as stocks, bonds, property or other financial instruments.

SWFs are entities that manage state savings for the purpose of investment. The accumulated funds may be part of holdings such as foreign currency deposits, gold, SDRs and IMF reserve position held by central banks and monetary authorities, along with other national assets such as pension investments, oil funds, or other industrial and financial holdings. These are assets of sovereign nations and are typically held in domestic and different reserve currencies such as the dollar, euro and yen.

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