(Bloomberg) -- Taiwan’s financial regulator has cautioned workers at its banks operating in China to be mindful of their comments, following Beijing’s decision to expand laws that threaten “separatists” from the island with the death penalty.
“We have reminded our banks in China to care about their staff and pay attention to their comments and behavior,” Peng Jin-lung, the head of the Financial Supervisory Commission, said in an interview in Taipei on Wednesday.
“The regulator will look into it case by case if there is an issue,” he said.
China has responded to Taiwan President Lai Ching-te’s inauguration in May with a range of measures to ramp up pressure, including holding large military drills around the main island that the US called “provocations.” It has also expanded laws aimed at supporters of independence, setting out punishments for specific offenses that range from prison time to the death penalty.
Taiwan’s financial institutions have gradually cut exposure to the world’s second-biggest economy, as part of efforts to diversify amid US-China tension and the pandemic, Peng said. Their investment in China has continued to drop as businesses are very sensitive, he said.
Taiwanese banks’ exposure to China dropped to just 21% of their net value this year, from a peak of about 70% in 2014, Peng said. Still, it’s unlikely that exposure will fall to zero, because financial institutions still need to serve Taiwan businesses operating in the country.
To manage the risk of operating in China, the reserve requirement for loans in China is 50% more than for those in Taiwan, he said, adding that the non-performing loan ratios of the island’s banks in China are very low.
The regulator aims to build Taiwan as one of Asia’s asset management centers, and plans to further ease rules on investments and products for wealth management business, after allowing some banks to sell structured products to their high net worth clients, he said.
Foreign Managers
“Many international asset management companies have offices in Taiwan, such as Blackrock, and we hope they can expand their local team as Taiwan has many investment opportunities, such as AI and technology,” Peng said. “We hope they can innovate new products in Taiwan.”
Total asset under management in Taiwan amounts to about NT$120 trillion ($3.7 trillion), including banks deposits and insurance funds, Peng said. Government plans to prioritize retaining wealth of its citizens locally, along with attracting overseas funds, when building Taiwan as asset management center, he said, adding that the impact of geopolitical risks will be smaller that way.
“Just like Taiwan’s property market is booming, will foreigners dare to buy property?” Peng said. “Probably not. But it doesn’t make a difference to locals. We are practical and we will focus on retaining the local wealth.”
(Updates with more comments at the end.)
©2024 Bloomberg L.P.
