May 30, 2013 / 6:03 AM / 4 years ago

Fitch: Taiwan Banks Expected to Meet Basel III Capital Rule

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Taiwan Banks: Basel III Capital Rules and Instruments here TAIPEI/HONG KONG/SINGAPORE, May 30 (Fitch) Fitch Ratings says in a new report that around half of Taiwan's domestic banks have met the fully phased-in Basel III Tier 1 Capital requirement while the rest are expected to be compliant through future earnings retention, despite being modest. Total Capital shortfall is manageable and expected to be funded by issuing Basel III-compliant Tier 2 instruments. Taiwanese banks' capitalisation, however, remains among the weakest in the region and structurally stretched because of thin profits. Envisaging the system's recent strong growth into potentially riskier offshore markets, particularly mainland China, any credit/investment growth without boosting their capital buffer or sufficient risk-adjusted reward may exert negative rating pressures. In the context of the system's modest capitalisation, Taiwan adopted regulatory discretion in Basel III's Tier 2 debt capital instruments, which limits bank defaults and reinforce systemic stability. Such move, while lowering the instruments' non-performance risk, increases their loss severity, as compared with Basel III standard instruments. Major regulatory discretion includes a less easily triggered government receivership as the point of non-viability, which tends to occur at a very low level of capital or 2% capital adequacy ratio (CAR). The report titled 'Taiwan Banks: Basel III Capital Rules and Instruments' is available at or by clicking on the link above. Contacts: Cherry Huang, CFA Director +886 2 8175 7603 Fitch Ratings Limited, Taiwan Branch Suite 1306, 13F, 205, Tun Hwa N. Rd., Taipei Sophia Chen, CFA, CPA Director +886 2 8175 7604 Jonathan Lee Senior Director +886 2 8175 7601 Media Relations: Wai Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: Additional information is available at ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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