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Taiwan financial firms' exposure to Credit Suisse at NT$157 billion

03/17/2023 12:12 PM
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Credit Suisse. Reuters photo
Credit Suisse. Reuters photo

Taipei, March 17 (CNA) Taiwanese financial institutions are not highly exposed to financially troubled Credit Suisse, the Financial Supervisory Commission (FSC) said Friday amid mounting concerns over the local financial sector's overseas exposure.

Taiwan's banking, insurance and securities sectors have NT$157.3 billion (US$5.14 billion) in exposure to the Swiss bank, with the insurance sector having the highest exposure at NT$108.2 billion as of the end of January, data from Taiwan's top financial regulator showed.

The insurance sector's exposure was not significant, however, because it represented only 0.35 percent of the insurance sector's total usable funds, the FSC said.

The FSC did not detail the types of financial instruments related to Credit Suisse held by local financial institutions, but it did note that Credit Suisse has issued 27 different international bonds (bonds denominated in foreign currencies) on the Taipei Exchange's over-the-counter (OTC) market.

Those bonds have a current balance of US$2.109 billion, accounting for 1.01 percent of the total circulation of bonds in the Taipei Exchange's international bond market, with life insurers the main buyers, according to the FSC.

Credit Suisse on Tuesday disclosed it found "material weakness" in its internal financial reporting controls as it scrapped bonuses for top executives in the wake of its worst annual performance since the global financial crisis.

The bank had sought fund injections to bolster its financial strength, but its largest shareholder, Saudi National Bank, said Wednesday it would not buy more shares in the Swiss bank because of regulatory issues.

Credit Suisse shares plunged 24 percent Wednesday as a result before rebounding almost 19 percent Thursday after the Swiss National Bank said it would provide US$54 billion as a liquidity backstop to the embattled bank.

The Swiss bank's financials further raised concerns over the local financial sector's overseas exposure after the collapse of California-based Silicon Valley Bank earlier this month.

The FSC said the local banking sector had seen its exposure to Credit Suisse decline in late 2022, falling to NT$48.9 billion by the end of the year from NT$55.3 billion at the end of October 2022.

According to the FSC, the exposure of local banks to Credit Suisse accounted for only 0.4 percent of their total overseas exposure worth of more than NT$12 trillion, but the commission said it will continue to monitor the situation and keep a close eye on the Swiss bank's financial condition.

The local securities sector's exposure to Credit Suisse totaled NT$197 million as the end of February, accounting for less than 1 percent of the sector's net worth, the FSC said.

At least seven Taiwanese banks serve as sales agents for Credit Suisse's financial products, according to the regulator.

Clients of those banks owned NT$67.4 billion in financial bonds and structured financial products sold by Credit Suisse as of the end of December, down NT$25.1 billion from the end of October, the FSC said.

The seven local banks that sold Credit Suisse's products have risk control measures in place, and if their clients wanted to redeem their investments now, those banks were not likely to suffer liquidity risks, the financial regulator said.

In addition, local investors had NT$4.63 billion in exposure to Credit Suisse as of the end of February through the purchase of mutual funds, accounting for about 0.13 percent of the total investment by Taiwanese investors in overseas mutual funds, the FSC said.

(By Hsieh Fang-yu and Frances Huang)


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