(Bloomberg) -- Taiwan’s biggest banks are stepping up efforts to lure deposits from both individuals and companies, responding to regulator demands for them to reduce a key ratio tracking their exposure to the island’s hot housing market.
Most Read from Bloomberg
Multiple bank employees told Bloomberg News that domestic lenders are aggressively seeking both Taiwan dollars and foreign currencies. Lenders are targeting institutions, including insurers and corporates, and retail investors to fulfill internal deposit targets, they said, asking not to be identified as they are not authorized to speak publicly.
In August, Governor Yang Chin-long met officials from 34 banks to underscore concerns about Taiwan’s high property prices and the risks for banks. Regulators asked for improvement plans to reduce the ratio of mortgages to deposits and debentures to well below the legal maximum of 30%, leaving the island’s banks, which have always been highly liquid, in the rare position of seeking more funds from depositors.
“The ratio at banks is likely to remain at a high level as property loans are an important income channel,” said Cherry Huang, an analyst at Fitch Ratings, who said the central bank has a “very conservative” regulatory stance. “As regulators are likely to still encourage banks to diversify loans, overseas advances may become more important for banks’ revenue.”
Although it is unclear how long the phenomenon will last, the effort to curb the key ratio could slow lending and crimp profits as banks pay more for deposits.
Some 15 banks had ratios above 27% at the end of October, with four over 28%, according to Financial Supervisory Commission data. The central bank declined to comment, while the FSC declined comment ahead of a regular press briefing.
On Dec. 13, Taiwan’s banks took more than NT$40 billion ($1.2 billion) of special time deposits, with one month rates of up to 1.75% and three months of 1.76%, according to central bank data. On Monday Dec. 16, they took in over NT$20 billion of special deposits.
The special deposits are sometimes only available for a short period, and central bank data shows many transactions of around NT$10 million ($310,000), but deposits of NT$1 billion have been seen.
The island’s central bank is scheduled to hold a board meeting on Thursday Dec. 19, with investors watching in case there are more real estate-related credit curbs. At its August meetings with banks, the central bank warned it will take action if lenders don’t act on their own to reduce risk.