Taiwan’s leading banks are actively pursuing deposit growth from individuals and corporations, driven by regulatory directives to mitigate exposure to the country’s robust housing market. This represents a notable shift for Taiwanese banks, typically characterized by high liquidity.
Multiple bank employees, speaking anonymously to Bloomberg News, confirmed aggressive deposit acquisition targets for both Taiwan dollars and foreign currencies. These efforts are focused on attracting funds from institutions, including insurers and corporations, as well as retail investors.
This push for deposits stems from concerns voiced by Taiwan’s central bank Governor Yang Chin-long in August. In a meeting with officials from 34 banks, Governor Yang highlighted the risks associated with Taiwan’s elevated property prices and urged banks to reduce their mortgage-to-deposit ratio significantly below the legal limit of 30%.
“The ratio at banks is likely to remain at a high level as property loans are an important income channel,” noted Cherry Huang, an analyst at Fitch Ratings, emphasizing the central bank’s “very conservative” regulatory approach. Huang anticipates a greater emphasis on overseas lending as regulators encourage loan diversification.
While the duration of this deposit drive remains uncertain, efforts to curb the mortgage-to-deposit ratio may constrain lending and profitability as banks face higher deposit costs. Financial Supervisory Commission data reveals that 15 banks exceeded the 27% ratio at the end of October, with four surpassing 28%. The central bank declined to comment on the matter.
“The main business of a bank is to take deposits from the public in order to sustain its business momentum,” stated Hou Li-yang, deputy director general of the FSC’s Banking Bureau, during a press briefing in Taipei. He further emphasized that while banks have autonomy in setting interest rates based on their risk assessments, prudent liquidity risk management is crucial when utilizing short-term liabilities for funding.
Recent data indicates the scale of these efforts. On December 13th, Taiwanese banks secured over NT$40 billion ($1.2 billion) in special time deposits, offering rates up to 1.75% for one-month terms and 1.76% for three-month terms. A further NT$20 billion in special deposits was garnered on December 16th. These special deposit offerings are often short-term, with transaction sizes ranging from NT$10 million ($310,000) to NT$1 billion.
Market participants are closely monitoring the central bank’s upcoming board meeting on December 19th for potential further real estate-related credit restrictions. The central bank’s August meeting included a clear warning of direct intervention if banks fail to proactively address risks.
“If moral suasion towards banks doesn’t affect the trend, we might implement direct measures,” Alan Pan, director general of the central bank’s banking department, cautioned on August 21st.
Prior to the August meetings, the central bank implemented several mortgage lending tightening measures with limited impact. Consequently, in September, the central bank introduced its seventh round of credit controls, reducing borrowing capacity for second homes and raising the reserve requirement ratio by 25 basis points for the second time this year.
These measures have begun to impact transaction volumes, although price effects remain less evident. Housing transactions in six major Taiwanese cities during October and November reached their lowest levels since February, a period affected by Lunar New Year holidays. The ongoing interplay between regulatory pressure and market dynamics will continue to shape the landscape for Taiwanese banks in the coming months.
