Taipei: The United States retained its status as the largest debtor to Taiwan's banking sector for the 43rd consecutive quarter as of the end of March, while China held the position of the third largest debtor, as reported by Taiwan's central bank on Monday. Data from the central bank indicated that the exposure of Taiwan's banks to the U.S. on an immediate counterparty basis reached a record US$209.01 billion at the end of the first quarter, marking an increase of 2.05 percent from the previous quarter.
According to Focus Taiwan, the Bank for International Settlements (BIS) defines an immediate counterparty basis as a methodology where positions are attributed to the primary party of a contract. Hsieh Jen-chun, deputy head of the central bank's Department of Financial Inspection, attributed the rise in exposure to the U.S. to an increase in securities investments, deposits placed in federal reserve banks, and loans.
At the end of March, the exposure of Taiwan's banking sector to China decreased by 1.14 percent from the end of December, totaling US$49.32 billion, as per the central bank. Hsieh noted that Taiwanese banks' exposure to China peaked at US$59.5 billion at the end of 2021. However, factors such as insufficient domestic demand, a weakening property market, and rising local debts in China due to a restructuring of the global supply chain contributed to the decline in exposure.
The gap between the exposure of Taiwanese banks to the U.S. and China widened further in the first quarter. Hsieh mentioned that it increased to US$159.7 billion by the end of March, having surpassed US$100 billion at the end of June 2023. The total international claims by Taiwanese banks on an immediate counterparty basis, which include investments, deposits, loans, and other holdings, rose by 2.50 percent from the previous quarter to US$702.6 billion as of the end of March, driven by increased lending in the global non-bank private sector.
The second highest area of exposure for the Taiwan banking sector was Luxembourg, amounting to US$51.71 billion at the end of March, representing a 0.14 percent increase from the previous quarter, according to the central bank. Australia ranked as the fourth largest debtor nation, with Taiwanese banks having an exposure of US$46.86 billion as of the end of March, reflecting a 6.59 percent increase from the previous quarter, as shown by central bank data.
Other significant areas of exposure for Taiwanese banks included Japan (US$38.30 billion), Hong Kong (US$34.04 billion), the United Kingdom (US$25.17 billion), Singapore (US$22.44 billion), France (US$20.62 billion), and Vietnam (US$19.18 billion), as indicated by the data. The central bank reported that exposure to the top 10 debtor nations totaled US$516.6 billion at the end of March, accounting for 73.54 percent of the total international claims held by Taiwan's banks.