Taiwan's bank exposures to China hit record
December 15, 2013, 12:01 am TWN
TAIPEI--Lending extended by banks operating in Taiwan to China as of the end of September hit a record high amid warming business ties across the Taiwan Strait, the central bank said Saturday.
On an ultimate risk basis, outstanding international claims of Taiwan's banks, including their offshore banking units, to China totaled US$51.01 billion as of the end of the third quarter, according to statistics compiled by the central bank.
As a result, China became the largest debtor of Taiwan, the central bank said.
The central bank said with several major Chinese banks, such as Bank of China and Bank of Communications, setting up footholds in Taiwan, Taiwanese banks have put their funds into these Chinese counterparts as deposits.
After Taiwan lifted a ban for domestic banking units of Taiwan banks to conduct yuan-denominated transactions in early February, cross strait financial exchanges have been on the rise, market analysts said.
The central bank said although the expansion of exposure to China indicated closer business across the Taiwan Strait, the statistics also showed the risks burdened by Taiwan banks have been over concentrated in China.
Also on an ultimate risk basis, Luxembourg ranked as the second largest debtor to Taiwan with outstanding international claims totaling about US$40.64 billion, the central bank said.
The large exposure to Luxembourg showed investors in Taiwan favored the European country as a mutual fund investment destination since the country, as a tax free haven, attracted many fund management companies to operate there, the central bank said.
The United States came in third as Taiwanese banks' exposure on an ultimate risks basis totaled US$40.10 billion, ahead of Hong Kong with US$18.82 billion in loans, the United Kingdom with US$7.53 billion, and Australia with US$7.10 billion.
The Cayman Islands was the seventh largest debtor of Taiwan's banks with US$7.01 billion in exposure, followed by India with US$5.73 billion, the West Indies UK with US$5.65 billion, and Singapore with US$4.02 billion.
In addition to Luxembourg, the West Indies UK, the Cayman Islands, the UK, and Singapore are known as a tax-free haven so that they attracted a large number of Taiwanese investors to park funds there, the central bank said.
The central bank said out of the total outstanding international claims by Taiwanese banks, 69.37 percent of the loans carried a maturity of one year or shorter as of the end of September, compared with 69.07 percent recorded at the end of June.
The bank said 8.27 percent of the total outstanding international exposure of Taiwan's banks carried a 1-2 year maturity as of the end of September, while 22.35 percent of the total loans carried a maturity of more than two years.
As of the end of September, 71.13 percent of Taiwan banks' total international lending went to the non-bank private sector, the statistics showed.