Taiwan banks’ exposure to China down for 2nd straight quarter

Data compiled by the central bank showed that at the end of the third quarter, outstanding international claims by Taiwanese banks to China totaled US$44.32 billion, down US$300 million or 0.66 percent from a quarter earlier on a direct risk basis. (NOWnews)

TAIPEI (CNA) — With the Chinese yuan continuing to fall against the U.S. dollar, lending extended by Taiwan-based banks to China fell for the second consecutive quarter as of the end of September, according to the central bank.

Data compiled by the central bank showed that at the end of the third quarter, outstanding international claims by Taiwanese banks to China totaled US$44.32 billion, down US$300 million or 0.66 percent from a quarter earlier on a direct risk basis.

The yuan depreciated against the U.S. dollar by 3.8 percent in the third quarter largely amid lingering concerns over trade friction between the United States and China, which prompted investors to move their funds into greenback denominated assets.

On an ultimate risk basis, which calculates a country’s consolidated debts after risk transfers, Taiwanese banks’ exposure to China at the end of September also fell US$1.5 billion or 2.19 percent from a quarter earlier to US$69.21 billion, the data indicated.

After the central bank eased rules to allow Taiwanese banks’ domestic banking units (DBUs) to conduct yuan-denominated transactions in February 2013, local banks’ lending to China had been growing.

Along with a stronger yuan in 2014, outstanding international claims by Taiwanese banks to China hit a new high of US$64.5 billion on a direct risk basis and a high of US$94.1 billion on an ultimate risk basis, making China the largest debtor to Taiwan at the end of September that year.

The high exposure to China had raised concerns among lawmakers, which prompted the Financial Supervisory Commission to come up with measures to cap the growth of the exposure.

Also on the back of the weakness of the yuan, Taiwanese banks’ exposure to China fell and ranked the second highest, after the United States at the end of March 2016.

As of the end of September of this year, the U.S. remained the largest debtor to Taiwan as Taiwanese banks’ exposure to the U.S. rose to US$70.07 billion from US$69.35 billion as of the end of June on a direct risk basis, while lending to the U.S. on an ultimate risk basis fell to US$68.71 billion from US$70.20 billion, the central bank said.

It added that aggregate international claims by banks in Taiwan at the end of September totaled US$407.2 billion, up 1.39 from a quarter earlier, and exposure on an ultimate risk basis also rose 1.19 percent to US$389.8 billion.

The central bank said non-bank private firms made up 63.13 percent of Taiwan’s total exposure, banks accounted for 29.92 percent and foreign public entities represented 6.94 percent on a direct risk basis.

After the U.S. and China, Luxembourg ranked as the third largest debtor to Taiwan at the end of September on a direct risk basis; Taiwanese banks had extended US$38.26 billion to the European country, down from US$38.94 billion at the end of June, the central bank said.

Hong Kong came in fourth with US$37.18 billion in debt, ahead of Japan with US$30.47 billion, Australia with US$19.77 billion, the Cayman Islands with US$17.10 billion, the United Kingdom with US$15.84 billion, Singapore with US$15.27 billion and the British West Indies with US$14.23 billion, the data showed.

The top 10 debtors of Taiwan, the order of which was unchanged from three months earlier, accounted for 74.29 percent of the country’s total international claims on a direct risk basis at the end of September, the central bank said.

By Pan Tzu-yu and Frances Huang