Rlpc taiwans fsc asks banks to explain low loan pricing

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Nov 19 Taiwan's Financial Supervisory Commission (FSC) met Taiwanese banks on Tuesday to discuss competition between banks, which is driving pricing lower on Taiwanese dollar and foreign currency loans and could hit profitability. Taiwanese banks are some of the biggest lenders to Asian syndicated loans with a 20 percent share of the market, according to Thomson Reuters LPC data. The move could curb Taiwanese banks' appetite to lend to finely-priced loans and could even push loan pricing higher across Asia, banking sources said. The FSC's examination bureau met Bank of Taiwan, Mega International Commercial Bank and Taiwan Cooperative Bank on Tuesday which are three of the top lead arrangers of Taiwanese loans, according to LPC data. The bureau was not immediately available for comment at press time. Loan bankers from the three banks said that they had been asked to prepare information on all outstanding syndicated loans for the discussions."This is not an investigation, the FSC just wanted to know our pricing history," one banker said.

Taiwanese syndicated loans have some of the tightest loan pricing in Asia, according to LPC data. Average margins on loans by the three banks is around 100 basis points (bps) over the primary or secondary Commercial Paper (CP) rate for Taiwanese dollar loans and 190bp over Libor for US dollar loans. Domestic banks used to require minimum all-in pricing of 150bps for US dollar loans for companies using the funds in mainland China. In May, a $246 million equivalent, five-year loan for Taiwan's Fujian Fuxin Special Steel Co Ltd paid all-in pricing of around 120bps for US dollars and 130bps for Renminbi.

A $500 million, five-year loan for Formosa Plastics Group followed with top-level all-in pricing of 115bps for US dollars and 135bps for Renminbi. Formosa's loan is one of the deals that the FSC is looking at, according to Taiwanese media reports. The deal is the largest loan to be syndicated in Taiwan this year. Pricing on a $396 million equivalent five-year financing for Taiwanese utility Ho Ping Power Co has also attracted attention. The loan pays a margin of 60bps over the secondary CP rate.

BIG BUYERS Taiwanese banks are a strong source of liquidity for Asian loans, and make large commitments to widely syndicated international currency loans. The FSC's discussions could affect Taiwanese banks' appetite to lend to cheaply-priced loans and raise their pricing requirements, which could lead to higher loan pricing across Asia, bankers said. Pricing was increased on a $70 million five-year financing for Taiwanese beverage packing material manufacturer Hon Chuan Enterprise Co Ltd's unit Hon Chuan Holding Ltd on Tuesday by 25bps to 120bps over Libor from 95bps. The deal was launched two weeks ago. Several offshore banking units of Taiwanese banks said that they are raising their pricing requirements on syndicated loans to 200bps from 150bps."We need at least 50bps more in pricing now," one banker said. The FSC was established on 1 July 2004 as the authority responsible for development, supervision, regulation, and examination of financial markets and financial service enterprises in Taiwan, according to its website.