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.
Intel Corp chief executive officer Lip-Bu Tan (陳立武) is expected to meet with Taiwanese suppliers next month in conjunction with the opening of the Computex Taipei trade show, supply chain sources said on Monday. The visit, the first for Tan to Taiwan since assuming his new post last month, would be aimed at enhancing Intel’s ties with suppliers in Taiwan as he attempts to help turn around the struggling US chipmaker, the sources said. Tan is to hold a banquet to celebrate Intel’s 40-year presence in Taiwan before Computex opens on May 20 and invite dozens of Taiwanese suppliers to exchange views
Application-specific integrated circuit designer Faraday Technology Corp (智原) yesterday said that although revenue this quarter would decline 30 percent from last quarter, it retained its full-year forecast of revenue growth of 100 percent. The company attributed the quarterly drop to a slowdown in customers’ production of chips using Faraday’s advanced packaging technology. The company is still confident about its revenue growth this year, given its strong “design-win” — or the projects it won to help customers design their chips, Faraday president Steve Wang (王國雍) told an online earnings conference. “The design-win this year is better than we expected. We believe we will win
Chizuko Kimura has become the first female sushi chef in the world to win a Michelin star, fulfilling a promise she made to her dying husband to continue his legacy. The 54-year-old Japanese chef regained the Michelin star her late husband, Shunei Kimura, won three years ago for their Sushi Shunei restaurant in Paris. For Shunei Kimura, the star was a dream come true. However, the joy was short-lived. He died from cancer just three months later in June 2022. He was 65. The following year, the restaurant in the heart of Montmartre lost its star rating. Chizuko Kimura insisted that the new star is still down
While China’s leaders use their economic and political might to fight US President Donald Trump’s trade war “to the end,” its army of social media soldiers are embarking on a more humorous campaign online. Trump’s tariff blitz has seen Washington and Beijing impose eye-watering duties on imports from the other, fanning a standoff between the economic superpowers that has sparked global recession fears and sent markets into a tailspin. Trump says his policy is a response to years of being “ripped off” by other countries and aims to bring manufacturing to the US, forcing companies to employ US workers. However, China’s online warriors