Taiwan’s plan to implement the final Basel III reforms in January next year would have a very limited impact on local banks’ capitalization and asset growth, since no banks are using the Internal Rating-Based (IRB) approach in calculating credit risk, Fitch Ratings said in a report on Thursday.
The final Basel III reforms include revised credit risk approaches, a standardized operational risk approach, a credit valuation adjustment framework, leverage ratio revisions and an aggregate output floor.
“As such, the output floor under Basel III would have no impact on banks using the standardized approach for calculating credit risk,” the agency said, adding that it does not expect large deviations in the banks’ capital calculation given that Taiwan’s risk weights are conservative compared with peers.
Photo: Reuters
The new capital rules are to lower the average common equity Tier 1 ratio by less than 20 basis points, it said.
Fitch said it is looking at stable core profitability, solid profit retention and moderate growth in risk-weighted assets to sustain capitalization.
The banks in Taiwan are well-positioned to adopt the new capital rules, including the higher capital surcharge (minimum Tier ratio of 11.0 percent) for domestic systemically important banks (D-SIB) by the end of next year, it said.
Taiwan’s six DSIBs have already met or are on track to meet the minimum regulatory capital ratio.
Banks with assets of more than NT$2.5 trillion (US$78.31 billion) may seek approval to use the more complicated IRB approach, with full implementation likely by 2026, Fitch said.
The IRB approach allows banks to model their own inputs for calculating risk-weighted assets from credit exposures to retail, corporate, financial institutions and sovereign borrowers, subject to supervisory approval.
IRB adoptions would be limited initially to DSIBs and that their operating profit/risk-weighted assets and Tier 1 ratios would improve modestly as they leverage on the capital uplift to expand their lending capacity, Fitch said.
However, their financial metrics would remain below those of regional peers in developed markets, in light of persistent competition and thin margins in Taiwan’s highly fragmented banking sector, it said.
Taiwan’s bank capital regime would remain more conservative relative to global practices, although risk-weight calculations post-IRB adoption should narrow relative to regional peers, it added.
Taiwan excludes property revaluation and other comprehensive income valuation gains from Tier 1 capital and imposes higher risk weights for select property exposures to contain concentration risk, Fitch said, adding that the sector’s non-performing loan ratio has stayed at very low levels for the past decade.
However, excessive growth in pursuit of yield overseas and high dividend payouts could pressure the banks’ viability ratings, Fitch said.
Still, the country’s stable operating environment would help sustain the banks’ financial metrics regardless of Basel III implementation, it added.
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) would not produce its most advanced technologies in the US next year, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. Kuo made the comment during an appearance at the legislature, hours after the chipmaker announced that it would invest an additional US$100 billion to expand its manufacturing operations in the US. Asked by Taiwan People’s Party Legislator-at-large Chang Chi-kai (張啟楷) if TSMC would allow its most advanced technologies, the yet-to-be-released 2-nanometer and 1.6-nanometer processes, to go to the US in the near term, Kuo denied it. TSMC recently opened its first US factory, which produces 4-nanometer
PROTECTION: The investigation, which takes aim at exporters such as Canada, Germany and Brazil, came days after Trump unveiled tariff hikes on steel and aluminum products US President Donald Trump on Saturday ordered a probe into potential tariffs on lumber imports — a move threatening to stoke trade tensions — while also pushing for a domestic supply boost. Trump signed an executive order instructing US Secretary of Commerce Howard Lutnick to begin an investigation “to determine the effects on the national security of imports of timber, lumber and their derivative products.” The study might result in new tariffs being imposed, which would pile on top of existing levies. The investigation takes aim at exporters like Canada, Germany and Brazil, with White House officials earlier accusing these economies of
Teleperformance SE, the largest call-center operator in the world, is rolling out an artificial intelligence (AI) system that softens English-speaking Indian workers’ accents in real time in a move the company claims would make them more understandable. The technology, called accent translation, coupled with background noise cancelation, is being deployed in call centers in India, where workers provide customer support to some of Teleperformance’s international clients. The company provides outsourced customer support and content moderation to global companies including Apple Inc, ByteDance Ltd’s (字節跳動) TikTok and Samsung Electronics Co Ltd. “When you have an Indian agent on the line, sometimes it’s hard
PROBE CONTINUES: Those accused falsely represented that the chips would not be transferred to a person other than the authorized end users, court papers said Singapore charged three men with fraud in a case local media have linked to the movement of Nvidia’s advanced chips from the city-state to Chinese artificial intelligence (AI) firm DeepSeek (深度求索). The US is investigating if DeepSeek, the Chinese company whose AI model’s performance rocked the tech world in January, has been using US chips that are not allowed to be shipped to China, Reuters reported earlier. The Singapore case is part of a broader police investigation of 22 individuals and companies suspected of false representation, amid concerns that organized AI chip smuggling to China has been tracked out of nations such
RSS