Assets Held by Taiwan's OBUs Drop the First Time in June 2014

Assets held by offshore banking units (OBUs) of banks in Taiwan declined US$257 million from a month earlier to US$183.428 billion in June, the first monthly drop on record, according to Taiwan's central bank.

Taiwan has 62 OBUs, of which 38 are operated by domestic banks and 24 by foreign banks. An official at the central bank attributes the drop in assets in June to mainly the fall in short-term loans extended by foreign banks.

The official says the 38 Taiwanese OBUs saw the value of their assets hit record high in June, contrasting the 24 foreign OBUs' fall exceeding US$600 million in May and then over US$500 million in June.

As of end of June the outstanding foreign-currency loans extended by Taiwan's OBUs dropped US$43 million from the previous month to US$91.916 billion, with foreign exchange transactions in the same month of US$45.432 billion, the highest of its kind.

Among the derivative financial products offered by the OBUs in June, options transaction totaled US$33.4 billion, surging US$11.6 billion from US$21.8 billion of a month earlier.

Insiders say that bought options by OBUs in January of this year peaked at US$185.9 billion, but almost halving to US$98.6 billion in February, then down to US$57.4 billion in March, US$42.2 billion in April, and plunging further to US$21.8 billion in May.

Insiders attribute such massive decline in options to the depreciation of China's currency, renminbi, that started to devalue in the beginning of the year. (JL)