Commercial Banks may Invest in Islamic Fixed Income Securities (Sukuk) Issued in Taiwan
The Financial Supervisory Commission (FSC) said on November 26, 2019 that it will issue an order to allow bank investment in Islamic fixed income securities (Sukuk) issued in Taiwan. Basically, Sukuk are bonds with similar characteristics to asset-based securities pursuant to Subparagraph 8, Paragraph 1, Point 2 of the Directions Governing Limitations on Types and Amounts of the Securities in which a Commercial Bank May Invest (the Directions). Therefore, a bank’s Sukuk investment shall comply with the aforesaid Directions and the aggregate outstanding amount of the original acquisition cost of such investment shall not exceed 10% of the bank’s calculation basis (Net worth deducts long term investment).
The FSC issued an order on June 14, 2019, allowing foreign issuers to issue foreign currency denominated Sukuk in Taiwan, sold only to professional investors. To be eligible, issuers shall meet the requirements of lease-based “Ijarah” and agency-based “Wakalah” according to the Taipei Exchange Rules Governing Management of Foreign Currency Denominated International Bonds.
Since the issuance of Sukuk in Taiwan is still at the fledging stage of development, it will take time for banks to familiarize themselves with the risks of these types of products. Therefore, the investment limit of Sukuk is included in the total balance control of all types of securities stipulated in Paragraph 1, Point 2 of the Directions. As mentioned above, to manage the concentration risk, the aggregate outstanding amount of the original acquisition cost of bank investment in Sukuk shall not exceed 10% of a bank’s calculation basis.
Visitor： 426 Update： 2019-12-09