Tabletop exercise highlights financial security during war

Taipei, April 15 (CNA) Taiwan's government should take precautions to prevent a financial blockade by international banks and ensure that it has enough capital to purchase wartime necessities, according to the results of a tabletop exercise released Monday.

The TTX Tabletop Exercise held in March by the Asia-Pacific Policy Research, Taiwan Center for Security Studies, and other organizations, looked at the possibility of international banks facing "external pressure" during wartime to impose a "financial blockade" on Taiwan.

Such a blockade could result in Taiwan's foreign-exchange reserves being transferred out of those banks' accounts, according to the scenario.

To prevent this from happening, Taiwan could enter into agreements with countries that support it to establish mechanisms for drawing on its foreign reserves to ensure it could purchase wartime necessities, the report on the tabletop exercise said.

The government should also borrow from international capital markets during peacetime, and if the borrowing limit has been reached, state-run banks and enterprises and local governments should be allowed, under strict supervision, to issue national debt to qualified foreign international investors.

In addition, the report suggested that the central bank consult with the Financial Supervisory Commission to simulate scenarios on controlling Taiwan's foreign-exchange reserves and stock exchange, as well as when to implement significant interest rate hikes.

The results of such simulations should then be presented to the president and the premier as a reference for policymaking, the report said.

Speaking at a news conference on the report's findings, Chen Chung-hsing (陳松興), an adjunct professor at Chinese Culture University Institute of National Development and Mainland China, suggested that Taiwan could make an arrangement with the Fed and the Bank of Japan to use foreign capital reserves during wartime.

Such arrangements would not be free, so Taiwan might have to use some of its overseas assets as collateral, Chen said.

With this type of mechanism in place, Taiwan's central bank would be able to reassure the public it would have sufficient access to its foreign-exchange reserves during a crisis, he said.

The TTX Tabletop Exercise places a special emphasis on crisis prevention over crisis management and risk management over damage control, said Kuomintang (KMT) Legislator Chen Yeong-kang (陳永康), a retired Navy admiral who organized the exercise.

The holistic exercise covers various fields from financial to energy security and the continued well-functioning of industries during war, thereby helping the country develop resilience, the lawmaker said.