Taiwan Banks Hold US$2.4 Billion in Sub-prime and SIV

UNCLAS TAIPEI 002450 SIPDIS SIPDIS STATE PLEASE PASS USTR STATE FOR EAP/RSP/TC, EAP/EP USTR FOR KATZ AND STRATFORD USDOC FOR 3132/USFCS/OIO/EAP TREASURY FOR OASIA/TTYANG AND HAARSAGER TREASURY ALSO PASS TO FEDERAL RESERVE/BOARD OF GOVERNORS, SAN FRANCISCO FRB/TERESA CURRAN, AND NEW YORK FRB MARI BOLIS E.O. 12958: N/A TAGS: EINV EFIN ECON PINR TW SUBJECT: Taiwan Banks Hold US$2.4 Billion in Sub-prime and SIV Assets ¶1. Summary. Taiwan's Financial Supervisory Commission disclosed that as of October 25, Taiwan banks held about US$2.4 billion in sub-prime related products and structured investment vehicles (SIVs). This represents about 3% of the sector's portfolio assets. The FSC says banks can cover any potential losses. End summary. Banks Disclose SIV and Sub-Prime Assets -------------- ¶2. Following an earlier request by Taiwan's Financial Supervisory Commission (FSC) for local banks to disclose their holdings of sub-prime-related assets in August 2007, the FSC ordered local banks to once again disclose holdings of sub-prime assets as well holdings in Structured Investment Vehicles (SIVs). According to the FSC, as of October 25, Taiwan bank holdings of these two asset classes totaled NT$78.1 billion (US$2.4 billion),including NT$21.8 billion (US$0.67 billion) in SIV products. The value of sub-prime based assets was NT$56.3 billion (US$1.7 billion),up from NT$40.4 billion (US$1.24 billion) reported in early August. The increase was mainly due to banks' new disclosures of assets already on the books, rather than from an increase in holdings. FSC Says Reserves Sufficient -------------- ¶3. FSC Vice Chairman Susan Chang told the press Taiwan banks holding these assets have set aside sufficient reserves to absorb likely losses. The holdings of these two asset classes, at only 3% of the sector's total portfolio investment, are relatively small. According to FSC estimates, likely losses will be NT$7 billion (US$215 million),including NT$3 billion (US$92 million) in sub-prime based products and NT$4 billion (US$123 million)in SIVs. YOUNG