Financial and Technology News

Task force to set criteria to decide most crucial banks

 2017/09/25
The Financial Supervisory Commission yesterday said it has formed a task force to set the criteria for identifying the nation’s most important financial companies in a bid to limit potential contagion risks in times of crisis.
The task force would assess international precedents when identifying domestic systemically important banks (D-SIBs) and domestic systemically important financial institutions (D-SIFIs), such as financial holding companies, the commission said.
RISK MEASURES
Companies that have received D-SIB or D-SIFI designations would be subject to elevated capital reserve requirements and compliance rules to ensure that they have higher loss absorbency and resilience against market shocks.
The task force is expected to complete drafting the criteria for the selection process by the first half of next year, Banking Bureau Deputy Director-General Sherri Chuang said.
SCALE AND RISK
Based on precedents abroad, the selection criteria is dependent on a financial company’s scale in terms of assets and exposures, as well as the level of perceived contagion risk depending on its market capitalization, amount of securities and instruments issued, and the amount of activities it conducts with its peers, Chuang said.
It also includes whether the company is immediately replaceable in terms of the number of customers served through deposits and loans.
The final criteria focuses on the complexity of a company’s operations, such as the number of its exposures to derivative instruments and international bonds.
LOTS TO CONSIDER
While the commission has been exploring the D-SIFI and D-SIFI system over the past few years, setting the selection criteria is made more difficult by the nation’s crowded financial services market, Chuang said.
The local market has 39 domestic banks and Taiwan-based subsidiaries of foreign banks.
The banks and institutions selected for the designation would be granted an adjustment period to shore up their capital reserve requirements, she added.
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