Banks’ exposure to PIIGS below NT$30 bil.


TAIPEI — The exposure of Taiwan’s banks to the debts owned by Portugal, Ireland, Italy, Greece and Spain (the PIIGS countries) has fallen below NT$30 billion (US$1.01 billion), according to the statistics compiled by the Financial Supervisory Commission (FSC).

As of the end of December, the local banks exposure to the five European countries was around NT$30 billion and the amount has decreased because of the banks’ prudent lending policies, the FSC said Friday.

The local banking sector has never been a major lender to European countries, FSC officials told reporters.

Since the debt crisis emerged in the eurozone, local banks have become very cautious about Europe’s financial health and have gradually cut back their lending and investments in the region, the officials said.

Government-invested banks, in particular, have made provisions to cover possible losses resulting from loans to Italy, and the debt problems in the eurozone are expected to have limited impact on them, according to sources within the banks.

The comments came after the local bourse was hard hit by escalating fears over the debt situation in Europe earlier in the day.

The benchmark weighted index dropped 2.79 percent to 7,151.19 points Friday, with foreign institutional investors selling NT$13.41 billion net worth of local shares amid concerns that Greece would exit the eurozone.

Due to the flight of foreign funds, the New Taiwan dollar extended its losses against the U.S. dollar to close at NT$29.630, weakening from Thursday’s closing level of NT$29.560.

Greece announced that will hold new elections in June, as it had failed to form a coalition government following its May 6 parliamentary vote.

But Fitch on Thursday downgraded Greece’s long-term credit rating to CCC from B-, saying the European country may leave the eurozone if its elections fail to produce a government willing to stick to the austerity measures the country has promised.

Greece’s exit could have an impact on 16 other nations in the eurozone, sending the euro to a four-month low, Fitch added.

Yen Tzung-ta, deputy governor of the Central Bank of the Republic of China (Taiwan), said the debt problem in the eurozone is not a new issue and the central bank has been keeping a close eye on the European financial situation.

The central bank is determined to remain well informed about the developments in Europe and will watch closely how the euro will move, to ensure stability in the local financial market, Yen said.