Taiwan’s financial exposure to Sri Lanka, which declared bankruptcy earlier this month, was NT$3 billion (US$100.28 million) as of the end of last month, with most of it in the banking and the asset management sectors, the Financial Supervisory Commission (FSC) told a meeting on Thursday.
Ten local banks had loans totaling NT$350 million — NT$290 million to Sri Lankan companies and NT$60 million to the nation’s financial institutions — as of the end of last month, down 44.6 percent from a year earlier, a commission tally showed.
Local banks had set aside reserves totaling NT$4 million to be used to write off sour debts after then-Sri Lankan prime minister Ranil Wickremesinghe on July 6 said that Sri Lanka was bankrupt as it faced its worst financial crisis in decades, the commission said.
Photo: Reuters
Local banks’ headquarters in Taiwan should have solid risk controls over the lending operations of their overseas units, it said.
Offshore funds had NT$2.53 billion of exposure to Sri Lanka, down 49.6 percent from a year earlier, while the exposure of domestic funds to the country was NT$110 million, down 90 percent from a year earlier, the commission said.
The combined exposure of offshore and domestic funds, NT$2.64 billion, was down 56.7 percent year-on-year, it said.
The annual decrease could be attributed to reduced interest among local asset management companies in the developing market, as well as a decline in the monetary valuation of Sri Lankan securities, it said.
Local life insurers and securities companies do not have exposure to the country, it added.
The commission said that it has reminded financial companies to monitor their investments in Sri Lanka tightly and to bolster risk controls.
Overall, Taiwan’s exposure to Sri Lanka was NT$3 billion at the end of last month, down 55 percent from a year earlier, the commission said.
Sri Lanka in May failed to make an interest payment on its foreign debt for the first time in its history, a failure that can damage national credit ratings.
Defaults on high-yields bonds in Asia totaled about US$32 billion for the first five months of this year, mainly because of defaults in China and Sri Lanka, UBS Group AG said in a report.
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