In a possible effort to emulate its peers in Hong Kong, Malaysia and Singapore, the Government of Taiwan wants to establish its own securitization program. Bankers familiar with the Taiwanese scene say the Financial Supervisory Commission - supervisor of the banking, insurance, securities and futures markets - is trying to entice banks with local credit card operations to come together on a mega NT$100 billion ($3.1 billion).
"The FSC has some notion that a large NT$100 billion deal will provide a real stimulus to the ABS market, without having thought through all the complex issues. Consequently, clients I have spoke to are skeptical" according to one source.
There are 53 bank credit card issuers in Taiwan, including local giants like Chinatrust Commercial Bank, the country's biggest card originator, and foreign firms such as Citibank and HSBC. By the end of 2004, around 44 million cards had been circulated, roughly five per household, with outstanding credit card debt totaling NT$457.9 million.
Sources say FSC wants issuers to pool receivables into a master trust, before launching a number of deals backed by those assets over the course of the next year. Reports suggest officials at the Bureau of Monetary Affairs, a division of FSC responsible for approving financial transactions, met with issuers in March to get feedback on the scheme, with the intention of issuing a NT$20 billion first deal in July.
Although the goal of the ABS program is to stimulate securitization, the reality is quite the opposite, say some bankers. Indeed, the government is so keen for its plans to go ahead, market talk suggests it is making it almost impossible for credit card issuers to do deals independently, at least not before they commit some receivables to the master trust.
The Bureau of Monetary Affairs has still not given approval to Taishin International Bank for a NT$10 billion card deal, put together by ABN AMRO, even though the transaction has been ready to go for two months. Although the regulatory approval process has previously been described as a lottery by some observers, the reason for the Taishin delay seems to be more than pure coincidence.
Some bankers suggest issuers would rather scrap securitization plans than be part of a program that does not benefit them. "This whole idea is nonsense and is putting a real dampener on bidding for deals," commented one Asian ABS head. "The only reason it is still being talked about is that banks have to pay lip service to regulators. Ultimately, though, it is not going to happen. Why would a bank with a good portfolio want to be involved with a bank with poor assets? They would get better terms on their own, plus there are other issues that need clarification, such as what happens to excess spread."
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