OREANDA-NEWS. Taiwanese banks are on track to meet the phased-in Basel III capital requirements and have adequate capital as buffer against economic challenges ahead, says Fitch Ratings in a new report. The banking sector's capitalisation is better than it appears and the sector is not highly leveraged, as a result of tougher rules on core capital eligibility and conservative risk-weighting. The report compared exposure risk-weight across various jurisdictions, highlighting differences arising from using the standardised and internal-ratings-based (IRB) approaches.

Taiwanese banks have accumulated adequate capitalisation, with only a few banks, mostly state banks, requiring additional capital to meet 2019 Basel III requirement. Fitch views the regulator's proactive approach in imposing prudential measures as helping Taiwanese banks to build capitalisation buffers. The measures include an offshore capital buffer of 200bp as well as additional capital charges and additional provisions on China exposure and mortgages.