Securitization in Taiwan off to a Strong Start

As anticipated, market participants are responding very positively to the implementation of a new legal framework for securitization in Taiwan. The Ministry of Finance (MOF) has already approved one major asset-backed deal since promulgation of the long-awaited Financial Asset Securitization Law (the FASL) in mid-2002, and a good many more are in the offing. Conditions for strong securitization market development in Taiwan are favourable: a workable legal framework is in place; a considerable pool of securitizable assets exists; there is strong interest from originators and investors; groundbreaking deals are already underway; and by most accounts the government, keen to modernize its financial services sector and resolve a mounting non-performing loan problem, has been supportive and responsive. Market analysts point out, however, that this development is contingent upon the government's commitment to continue financial sector reforms and clear existing and emerging hurdles to securitization in a timely manner.

Groundbreaking Deals

Taiwan's first securitization product, a US$103 million collateralized loan obligation issued through private placement by the trustee, the state-owned Land Bank of Taiwan, consists of a portfolio of assets originating with the Taiwan Industrial Bank (ITB). The deal was approved by the MOF in January and closed in late February this year.