Investing in Taiwan’s Financial Future

As paradigms in the banking industry shift rapidly, the future of banking hedges on innovation, specialization, and mastery of the digital business landscape. In the past year, volatility in global and regional markets—from the plunge in oil prices to post-Brexit uncertainties—has made Taiwan’s banking industry keen to bring stability and growth to the financial liberalization process and the future of Taiwan’s business community.

In the recently published 2017 Taiwan White Paper, the Banking Committee of the American Chamber of Commerce in Taipei recommends practical steps for the Financial Supervisory Committee to take to improve Taiwan’s financial services industry and related markets.

The strategic proposals to broaden opportunities for offshore product development and distribution comprise a cornerstone of the Committee’s position paper. Within this framework, the Committee presents the following recommendations to help foster a thriving and robust financial market in Taiwan:

  • Lower the credit rating requirement for issuers selling offshore structured products (OSP) to retail investors in Taiwan.
  • Allow those applying to offer OSP to receive a six-month extension if changing market conditions hinder the applicant from finding a suitable time to launch the product during the original six-month approval period.
  • Expand the scope of products available within the “bond agency” platform to include Taiwanese-issued overseas bonds and PRC-linked bonds, so that onshore financial institutions can provide the full scope of services to eligible investors.
  • Amend the net worth requirement for foreign banks conducting repo/reverse repo deals to benchmark the net worth of the bank’s home office (or foreign subsidiaries), rather than the current benchmark of the net worth of the Taiwan branch. As foreign banks are the main liquidity providers in Taiwan, it is crucial to healthy market liquidity that they are able to provide needed foreign currency funding to local investors, including the Central Bank.
  • Broaden the parameters of an entity’s size so that overseas banks and subsidiaries working in Taiwan can provide suitable product services that meet the needs of corporate clients’ business models, and treat Senior Professional Investors the same as Professional Institutional Investors by allowing them to invest in the “derivatives information and advisory” business.

One of AmCham’s top priority issues within the 2017 Taiwan White Paper is replacing regulatory restrictions with a framework which incentivizes onshore wealth management. To reach this goal, the Banking Committee recommends encouraging and providing policy incentives to banks which have committed to onshore business expansion and investment.

In its position paper, the Committee advises “revising existing regulations to enable the banking industry to provide credit to clients who pledge their entrusted financial assets as collateral with the same lending bank.” Globally, this type of investment-product financing is a common wealth management service and has been offered in Hong Kong and Singapore for years. Building this incentive-based framework will enhance returns, diversify borrowing and liquidity, and benefit both clients’ financial flexibility and the overall banking market.

To read the full Banking position paper, click here.