By Kao Shih-ching / Staff Reporter
The country’s financial institutions cut their investments in local and foreign stocks by NT$597 billion (US$19 billion) in the first seven months of this year, while increasing their bond holdings by NT$1.5 trillion, the financial institution said on Thursday. Financial Supervision Commission.
The moves came in response to global stock market slippages and central bank rate hikes, the commission said.
With the US Federal Reserve expected to raise key interest rates by another 75 basis points this month, local financial institutions are likely to continue to increase their bond holdings and cut their equity positions, it said.
Photo: Ritchie B. Tongo, EPA-EFE
Taiwanese banks, insurance companies and securities firms held NT$3.1 trillion in local and foreign shares at the end of July, down NT$597.1 billion from the end of last year, the commission said.
Insurance companies in the first seven months invested NT$2.34 trillion in local and foreign stocks, compared with investment in shares of banks of NT$689.2 billion and securities firms NT$69 billion, it said.
Combined bond holdings by financial institutions totaled NT$27.24 trillion at the end of July, up NT$1.49 trillion from the end of last year, as central bank rate hikes boosted bond yields .
From January to July, life insurance companies increased their bond holdings by NT$904 billion, while banks increased their holdings by NT$596.7 billion, the commission said.
Separately on Tuesday, the commission said an inspection found that 20 financial institutions had contravened credit control measures for real estate financing set by the commission and the central bank.
Inspection of 10 banks, seven credit unions and three bill finance companies found six major violations, the Financial Examination Bureau said.
The most serious violations related to loan-to-value (LTV) requirements and the calculation of the capital adequacy ratio, it said.
Three banks and a credit union were found to have offered loans to home and land buyers with LTV ratios above limits set by the central bank, the office said.
Four banks were found to have used the wrong risk weight to calculate their assets, resulting in higher capital adequacy, it said.
A bank and a credit union were found to have lent funds to real estate developers as working capital for salaries, rent, and general office expenses, while the funds were used for construction projects or for the purchase of land in contravention of banking rules, he said.
The office has demanded that financial institutions correct their practices and submitted its findings to the Banking Office and the central bank, which is expected to impose fines soon, it said.
The commission said it has no plans to tighten regulations on real estate financing by the end of this year and expects finance companies to comply with the rules.
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