April 5, 2012 / 10:59 AM / 5 years ago

Taiwan to raise limit on investments, loans to China

TAIPEI, April 5 (Reuters) - Taiwan's financial regulator will allow the island's banks to lend to or invest in Chinese companies to the equivalent of 100 percent of their net worth, raising the limit in the latest sign of improving banking ties across the Taiwan strait.

The change is subject to cabinet approval after the regulator consults the island's central bank, the Financial Supervisory Commission (FSC) said in a statement. It did not say what the previous limit was.

Taiwan's banks had made loans to Chinese entities to the equivalent of 30 percent of their net worth as of end of last year, an FSC official said.

They were previously not allowed to invest. The new limit of 100 percent equivalent is a combined limit for loans or investments.

Taiwan's banks, long struggling with a crowded home market and lacking a presence in global markets, have become increasingly vocal of late in their push for better access to the booming China market.

A landmark trade deal in 2010 between Taiwan and China, political rivals and one-time military foes, had raised hopes that banks would also be able to get a bigger slice of the mainland market, where they have much less of a presence than other Taiwanese industries such as manufacturers.

But progress has been slow because of political sensitivities in Taiwan over allowing reciprocal investment from China in the island's financial sector.

Taiwan's banks posted a 0.59 percent return on assets (ROA) in 2011, the lowest among banks in Asia excluding Japan, according to Fitch Ratings. (Reporting by Faith Hung)

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