U.S. remains Taiwan banking sector's largest debtor for 27th quarter

06/25/2022 04:20 PM
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CNA file photo
CNA file photo

Taipei, June 25 (CNA) The United States remained the largest debtor of Taiwan's banking sector for the 27th consecutive quarter in the first quarter of this year, with exposure rising more than 8 percent from the previous quarter on the back of an increase in U.S. bonds, according to Taiwan's central bank.

The second largest exposure of Taiwanese banks as of the end of March was to China, although claims by the local banking sector fell more than 4 percent from a quarter earlier, the central bank said.

Data compiled by the central bank indicated that outstanding international claims by Taiwanese banks on the U.S. on a direct risk basis stood at US$125.38 billion as of the end of March, up 8.30 percent from a quarter earlier.

Pan Ya-hui (潘雅慧), deputy head of the central bank's Department of Financial Inspection, told CNA that the U.S. Federal Reserve kicked off a rate hike cycle in March, a move that boosted treasury and bond yields, prompting Taiwanese banks to raise their holdings of American debt.

On the other hand, Pan said, lockdowns in several Chinese cities, including Shanghai, Suzhou and Kunshan, to combat COVID-19 infections made Taiwanese banks more cautious, leading and cut exposure to Chinese debtors.

As a result, the Taiwanese banking sector's claims on China as of the end of March dropped 4.56 percent from a quarter earlier to US$56.77 billion, but remained the sector's second largest debtor, the central bank said.

As of the end of March, the U.S. and China accounted for 23.71 percent and 10.74 percent respectively of the local banking sector's exposure, which totaled US$528.7 billion, up 1.26 percent from a quarter earlier, in the wake of an increase in investments in the public sector outside Taiwan, according to the central bank.

The non-banking sector outside Taiwan accounted for 59.56 percent of Taiwanese banks' total exposure, foreign banks represented 28.84 percent and the public sector outside Taiwan 10.84 percent, the central bank said.

After the U.S. and China, Luxembourg remained in third spot, with Taiwanese banks' exposure on a direct risk basis at US$39.72 billion as of the end of March, down 6.11 percent from a quarter earlier, ahead of Hong Kong (US$37.38 billion), and Japan (US$30.86 billion), the data showed.

Australia took the sixth spot with the exposure of Taiwan's banking sector reaching US$30.81 billion at the end of the first quarter, followed by the Cayman Islands (US$18.62 billion), Singapore (US$17.97 billion), Vietnam (US$16.87 billion) and the United Kingdom (US$16.81 billion).

The top 10 debtors accounted for 73.99 percent of Taiwanese banks' aggregate international claims at the end of March, the central bank said.

Among the 10 debtors, Australia saw the largest increase of 16.49 percent in debt sequentially, while exposure to Japan fell 15.91 percent quarter-on-quarter, the steepest drop, the central bank added.

(By Su Ssu-yun and Frances Huang)

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