Financial services to Taiwan
Trends and opportunities
Taiwan’s location at the center of the Asia-Pacific region is strategically advantageous, as highlighted by the impact across all sectors, including financial services, of the rapid economic growth of China in recent years. The gradual loosening of the flow of goods, capital and personnel between Taiwan and China is enabling Taiwan to make better use of its geographical location to attract international investment and the participation of international institutions.
Taiwan is a member of the World Trade Organization (WTO), competing internationally through barrier-free access to the economies of other WTO members and the lowering of domestic consumer prices. In the World Economic Forum's Global Competitiveness Report 2014-2015, Taiwan ranked 14th of 144 economies.
Deposit taking institutions held a total of over US$1.68 trillion in assets at the end of 2013, climbing by just over eight per cent from the previous year’s end. Total loans and deposits amounted to US$732 billion and US$1.12 trillion, in 2013 respectively. Compared to the end of 2012, total loans rose slightly by 3.3 per cent, while total deposits increased by 5.3 per cent. Domestic banks held nearly 78 per cent of assets and deposits and had a share of 91.84 per cent of loans in all deposit-taking institutions in 2013. (Source: Financial Supervisory Commission Banking Bureau, Financial Statistics Abstract, Deposits at General Banks and Credit Cooperatives, Nov 2014)
Total outstanding loans extended by the current 39 domestic banks amounted to US$673 billion at the end of 2013, an increase of US$20.18 billion as compared to 2012. Meanwhile, the Non-Performing Loans (NPLs) of all banks totalled US$2.96 billion, with an NPL ratio of 0.36 per cent in 2013.
As of December 2013, there are 39 commercial banks in Taiwan of which 16 are financial holdings companies, totalling 3438 branches. 27 foreign banks have been granted licenses and have 39 branches. ANZ has completed its takeover of RBS and operates 13 branches across Taiwan.
(Source: Banking Bureau, Financial Supervisory Commission, R.O.C., The Banking System, Financial Institutions, Domestic Banking Institutions (PDF), Oct 2014)
The Taiwan Stock Exchange (TWSE) is the primary equities market in Taiwan; in addition, there are two other regulated markets:
- The Gre-Tai Securities Market (GTSM) – the market for bonds and small-and-medium sized enterprises.
- The Taiwan Futures Exchange (TAIFEX) – the principal derivatives market in Taiwan.
Every trade is cleared and settled by the relevant market. The Taiwan Depository and Clearing Corporation (TDCC) provides the custodian and book-entry services.
At the end of 2013, the total market capitalisation of the 866 companies listed on the TWSE amounted to US$802 billion, representing an increase of 14.80 per cent compared to year-end figures for 2012. In 2013, the ratio of the Taiwan market capitalisation to GDP was 139.8 per cent and the total trading value was US$619 billion. The market price-to-earnings ratio (P/E ratio) of the Taiwan market in 2013 was 18.04, with a turnover rate of 82.64 per cent, putting Taiwan above other markets such as Hong Kong, Singapore and the UK. Taiwan’s ranking as a centralised market among the top global exchanges in terms of turnover makes it an attractive marketplace for investors.
In 2013, foreign and mainland Chinese investors had bought US$161.9 billion and sold US$154.3 billion worth of shares on the TWSE for the year, making for a cumulative net inward investment of US$7.9 billion.
At the end of 2013, foreign investment accounted for 34.63 per cent of the GTSM’s market capitalisation (with a total market value of US$276.1 billion).
From 2009 to 2013, the cumulative net inward remittances by Foreign Institutional Investors and Overseas Chinese and Foreign Individual Investors in connection with investments made on the Taiwan securities market was approximately US$812 billion.
(Source: Taiwan Stock Exchange Fact Book 2014, Shareholdings of Foreigner (2009-2013), Nov 2014)
The funds management industry in Taiwan is operated predominantly by Securities Investment Trust Enterprises (SITE) and Securities Investment Consulting Enterprises (SICE). The industry was hit hard by the global financial crisis with substantial contraction due to the declining investment assets and redemption pressures from investors.
As at September 2014, the number of domestic SITEs was 37 and the onshore public offering funds were 632, with a fund size of US$65.8 billion.
With the financial liberalisation and development trends in international investment, up to September 2014, the accumulated amount of offshore funds reached 1034 and total capital held by domestic investors increased to US$117 billion. This is indicative of domestic investors seeking to extend their investments to include overseas markets for more diverse investment alternatives.
Additionally, this gave an opportunity for domestic securities investment institutions to learn from foreign asset-management institutional practices. This constructive interaction allowed domestic asset management institutions to compete with the world’s best asset management companies and gave an opportunity to foreign institutions to develop the Taiwan market. Ultimately, investors benefit from more choices in the market.
The wealth management sector has also become attractive in recent years, due to a growing elderly population and a decreasing number of children in families. Households have more disposable income and there is demand for new financial products offering reasonable returns. This has given banks in Taiwan a chance to build up their wealth management business and spurred them to design new financial products to satisfy customers’ needs.
(Source: Securities Investment Trust & Consulting Association of the R.O.C., Industry Statistics, Nov 2014)
Tariffs, regulations and customs
Taiwan Financial Supervisory Commission
The primary objectives of the Financial Supervisory Commission (FSC) are to consolidate the supervision of banking, securities and insurance sectors and to act as a single regulator for all of these industries. The FSC is comprised of four:
- bureaus (Banking, Securities and Futures, Insurance and Financial Examination).
Several important policies implemented by the FSC that have shaped the industry today include, ‘Enterprises Acquisition and Merger Law’, as well as amendments to the ‘Securities and Exchange Act’ and the ‘Company Act’. The FSC has also promoted the introduction of new financial products and implemented many reform measures, such as:
- listing of exchange-traded funds (ETFs)
- relaxing limitations on foreign investment
- streamlining foreign registration procedures
- adjusting various trading mechanisms so that they are more in line with international standards.
The Central Bank of China
The Banking Law and the Law Governing the Central Bank of China (CBC) mandates the implementation of the monetary policy and foreign exchange regulations. The CBC adjusts the national money supply to promote its policy goals of price stability and sound economic growth. The CBC also concerns itself with the sound operation of banks and exchange rate stability.
The Central Deposit Insurance Corporation
In 1985, the Central Deposit Insurance Corporation (CDIC) was formally established in accordance with the Deposit Insurance Act. CDIC provides insurance coverage of up to US$31 000 for eligible deposits.(Source: Central Deposit Insurance Corporation, Deposit Insurance System, Jan 2015)
Regulations Governing Offshore Funds
To better safeguard investor interests, the FSC recently amended the Regulations Governing Offshore Funds. Key amendments include:
- Changes to requirements for investment in offshore funds through securities brokers under foreign securities brokerage agreements.
- New provisions setting out the matters for which a master agent must file for approval or file a report.
- A requirement for fund intermediaries to disclose distribution related expenses information.
- Prohibiting the payment or acceptance of distribution related expenses other than those set out in the agreement.
- Rules governing the private placement of offshore funds have been strengthened.
The offshore jurisdiction in question must also have conducted a fund-related regulatory mapping exercise with the FSC and entered into an agreement providing for cooperation in funds supervision. Additionally, the FSC have set a new restriction that the percentage of the investment in any individual, privately-placed offshore fund that is contributed to by domestic investors may not exceed 90 per cent of the said offshore fund’s net asset value. (Source: Securities Investment Trust & Consulting Association Of The R.O.C. , ‘Regulations Governing Offshore Funds’, May 2006)
Marketing your products and services
Opportunities exist across the sectors – from fund management, banking and derivatives, to insurance. Before entering the market it is essential to consult and research thoroughly. There are regulatory requirements that must be observed when conducting business and marketing activities in Taiwan.
Market and distribution channels vary from product to service and Austrade can assist Australian exporters to assess the best market entry method.
Links and industry contacts
Government, business and trade resources
The Bankers Association of the Republic of China
Central Bank of China
Central Deposit Insurance Corporation
Financial Supervisory Commission
GreTai Securities Market
Life Insurance Association of the Republic of China
Securities Investment Trust & Consulting Association of Republic of China
Taiwan Futures Exchange
Taiwan Securities Association
Taiwan Stock Exchange
The Trust Association of the Republic of China
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