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Central Bank Allows Domestic Bank Overseas Branches to Operate NT-Dollar-Based NDF Business

2014/09/22 | By Judy Li

Taiwan's central bank has recently announced lifting the ban on New-Taiwan-Dollar-based non-delivery forward (NDF) business operated by overseas branches of domestic banks.

This means that overseas branches of domestic banks can now apply with the Financial Supervisory Commission (FSC) to handle NT-Dollar-Based NDF business, and will be approved accordingly as long as the central bank complies with FSC's  approval of such applications.

S.Y. Lin, director general at Foreign Exchange Dept. of the central bank, says that the central bank started to allow NDF business in 1995, but has encountered many side effects to have severely impacted the island's foreign exchange market, hence prompting in 1998 the central bank to close the NT-Dollar-Based NDF market on the island.

To enable Taiwanese banks to compete on level playing field against foreign banks, which are qualified to operate NT-Dollar-Based NDF, the central bank has decided to allow overseas branches of domestic banks to handle NT- Dollar-Based NDF again, with caps on totals of NT-Dollar NDF and option exchange rates to not exceed one-fifth of the foreign exchange reserves. (JL)