The domestic financial sector’s exposure to Israel, which has declared war on militant group Hamas, exceeded NT$172 billion (US$5.34 billion) as of the end of August, with the insurance sector accounting for about 98 percent of the total, the Financial Supervisory Commission (FSC) said.
Data compiled by the commissionC showed the three major financial industries — banking, insurance and securities — had a total exposure of NT$172.58 billion at the end of August.
Tensions in the Middle East have been escalating since Hamas launched a surprise attack on Israel on Saturday last week, with Israel declaring war on Hamas a day later, raising concerns over Taiwan’s investments in the country.
Photo: EPE/EFE
Following Israel’s blockade of the Gaza Strip and intensified missile exchanges, at least 2,600 people had been killed as of Thursday, with an additional 9,500 injured, international news reports have said.
The commission said that the domestic insurance industry had the largest exposure, worth NT$169.4 billion, to Israel as of August, with the investments all by life insurance companies, largely in Israeli government bonds, up NT$2.6 billion from a year earlier.
No non-life insurers in Taiwan hold Israeli government bonds, it added.
No credit rating downgrade has been announced for Israeli government bonds, despite the escalating military conflict; interest payments from the Israeli government continue and remain normal, the commission said.
According to local media reports, the insurance operations of five large financial holding firms — Cathay Financial Holding Co (國泰金控), Fubon Financial Holding Co (富邦金控), Shin Kong Financial Holding Co (新光金控), Yuanta Financial Holding Co (元大金控) and First Financial Holding Co (第一金控) — accounted for NT$102.8 billion of Israeli government bonds at the end of June.
Cathay Financial and Fubon Financial had NT$58.7 billion and NT$20.8 billion of Israeli government bonds respectively at the end of June, which made up 8 percent and 3 percent of the two companies’ respective net worth.
Analysts said risks from asset value impairment remain under control, the reports said.
Taiwan’s banking industry had about NT$3.18 billion in exposure to Israel at the end of August, with the exposure composed of NT$771 million in lending and NT$2.41 billion in investments, which came largely in the form of bond purchases for long-term investment purposes to receive stable fixed income, the commission said.
The banking industry has allocated about NT$227 million in provisions for potential losses from asset value impairment on the NT$2.41 billion investments in Israel, it added.
The domestic securities industry reported no exposure to Israel, while 106 mutual funds established by investment trust companies recorded a total of NT$6.22 billion in exposure to the country as of the end of August, up NT$1.08 billion or 21.13 percent from a year earlier, the commission said.
Securities and Futures Bureau Deputy Director-General Kao Ching-ping (高晶萍) said the increase in exposure from mutual funds came after select mutual funds targeting the emerging bond markets raised their investments in Israel.
Despite the increase in investments, the exposure accounts for only 0.1 percent of the combined size of mutual funds in Taiwan, down from 0.11 percent a year earlier, Kao said, adding that the ratio is low and risks remain controllable.
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