Taiwan seeks to drain excess cash, cool asset prices

The central bank has been issuing negotiable certificates of deposit to absorb cash, said the official, who spoke on condition of anonymity yesterday in Taipei. The bank, which holds its quarterly policy meeting on March 25, will maintain a loose monetary policy stance, the official said.

“The central bank may accelerate open-market operations to mop up excess liquidity on concerns the funds are flowing into the property market and pushing up prices,” said Ma Tieying, a Singapore-based economist at DBS Bank.

Home loans reached a record NT$4.93 trillion in January and property prices in the capital, Taipei, surged 20 percent last year as banks on the island of 23 million people cut mortgage lending rates to the lowest level since records began. The central bank uses open-market operations to influence the amount of reserves and level of interbank call-loan market interest rates, the official said.

The Central Bank of the Republic of China on March 8 asked lenders to provide details of mortgage lending within three days and the financial regulator told bankers to tighten lending and ensure the quality of home loans.

The central bank issued NT$2.03 trillion of certificates of deposits in the first nine days of the month, more than the NT$1.91 trillion that matured during that period, according to the monetary authority's Web site.

Taiwan's banks held NT$34 billion less in their reserves than required by the central bank as of Tuesday, according to Taipei Interbank Money Center.

“The central bank has no choice but to mop up idle liquidity, which is a result of hot money coming in,” said Jason Chen, a bond trader at China Bills Finance Corp. in Taipei.

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