Premier Mao Chi-kuo today said that the recently launched "financial import substitution" program is helping to retain investments and talent in Taiwan, not only increasing business opportunities but also creating jobs for the financial sector.
To promote the program, the Financial Supervisory Commission (FSC) has relaxed regulations on bonds and financial derivatives to allow domestic insurers to trade overseas financial products through local banks or equity firms.
Due to limited product choices in a lackluster domestic market, Taiwan's financial institutions have turned to overseas markets, investing about NT$12 trillion (US$381 billion) in foreign financial products, Premier Mao said. Also, many of Taiwan's financial professionals have relocated to Hong Kong, Singapore and Shanghai or other countries.
Bringing capital back to Taiwan is essential, as it will also lure talent back and attract more young people to the financial sector, Mao said. However, careful planning is needed to keep returning capital from flowing into real estate and pushing up property prices. The FSC's program will channel the capital into financial products, which is expected to create huge growth potential for the industry and stimulate markets.
Premier Mao directed the FSC to continue pushing the deregulation measures while being mindful of managing financial institution risks, and to encourage the institutions to design innovative products and cultivate more professionals.
Among the most successful measures, local insurers that invest in foreign-denominated bonds issued through domestic stock markets are no longer required to cap the amount of those investments to 45 percent of their capital. As a result, the amount of bonds issued in Taiwan jumped from a total of NT$137.3 billion in the seven-plus years (November 2006 to June 2014) before this measure was put in place to NT$694.4 billion in the six months after.
The FSC pointed to more positive results expected in the near future:
- About 22 banks have been permitted to sell overseas bonds and are projected to increase their revenues by NT$41.5 billion in the next year.
- Deregulation on bond issuance will grant more flexibility in product designs, increasing issuance to roughly NT$232 billion within one year.
- Domestic banks are now permitted to offer consultation on offshore derivatives and are expecting to rake in NT$2 billion additional revenues within the next year.
- An interest rate exchange platform has been set up for 30 participating financial institutions. The value of transactions conducted through the platform is expected to reach NT$150 billion in its first year (2015).