Wednesday, September 20, 2017

Taiwan to protect insurers from callable bond risks

To shield local insurance firms from difficulties in investment planning as bond issuers exercise options to pay off debt early, the Taiwanese financial market regulator is planning to come up with new policies soon.

The Financial Regulatory Commission (FRC) is now in talks with insurers concerning risks and so has yet to make a decision on the new policies, said Chiung-Hwa Shih, deputy director general at the insurance bureau of the FRC.

Normally, foreign issuers that sold callable notes in Taiwan have rushed to repay the securities before maturity in an effort to lower financing costs.

But Chiung-Hwa said this poses risks. About US$6.7 billion of foreign-currency notes sold by international borrowers in Taiwan were repaid this year ahead of maturity, including those sold by Verizon Communications, Goldman Sachs Group, Morgan Stanley and Citigroup Inc.

The figure represents an increase from US$2.1 billion for all of 2015.

The situation is fueling debate about securities that can be redeemed early.

Some brokerages saying the ability to sell debt with shorter-term call dates helps attract issuers to Taiwan.

 

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