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Cablegate: Taiwan Banks Hold Us$2.4 Billion in Sub-Prime and Siv

VZCZCXRO8862
RR RUEHGH
DE RUEHIN #2450 3100952
ZNR UUUUU ZZH
R 060952Z NOV 07
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC 7310
RUEATRS/DEPT OF TREASURY WASHDC
INFO RUCPDOC/USDOC WASHDC
RUEHBK/AMEMBASSY BANGKOK 3878
RUEHBJ/AMEMBASSY BEIJING 7419
RUEHUL/AMEMBASSY SEOUL 9002
RUEHGP/AMEMBASSY SINGAPORE 7053
RUEHKO/AMEMBASSY TOKYO 9204
RUEHML/AMEMBASSY MANILA 0190
RUEHJA/AMEMBASSY JAKARTA 4142
RUEHKL/AMEMBASSY KUALA LUMPUR 3826
RUEHHI/AMEMBASSY HANOI 3401
RUEHBY/AMEMBASSY CANBERRA 4636
RUEHWL/AMEMBASSY WELLINGTON 1906
RUEHHK/AMCONSUL HONG KONG 8702
RUEHGH/AMCONSUL SHANGHAI 1453
RUEHGZ/AMCONSUL GUANGZHOU 0638

UNCLAS TAIPEI 002450

SIPDIS

SIPDIS

STATE PLEASE PASS USTR
STATE FOR EAP/RSP/TC, EAP/EP
USTR FOR KATZ AND STRATFORD
USDOC FOR 3132/USFCS/OIO/EAP
TREASURY FOR OASIA/TTYANG AND HAARSAGER
TREASURY ALSO PASS TO FEDERAL RESERVE/BOARD OF
GOVERNORS, SAN FRANCISCO FRB/TERESA CURRAN, AND NEW YORK FRB MARI
BOLIS

E.O. 12958: N/A
TAGS: EINV EFIN ECON PINR TW
SUBJECT: Taiwan Banks Hold US$2.4 Billion in Sub-prime and SIV
Assets

1. Summary. Taiwan's Financial Supervisory Commission disclosed
that as of October 25, Taiwan banks held about US$2.4 billion in
sub-prime related products and structured investment vehicles
(SIVs). This represents about 3% of the sector's portfolio assets.
The FSC says banks can cover any potential losses. End summary.

Banks Disclose SIV and Sub-Prime Assets
---------------------------------------
2. Following an earlier request by Taiwan's Financial Supervisory
Commission (FSC) for local banks to disclose their holdings of
sub-prime-related assets in August 2007, the FSC ordered local banks
to once again disclose holdings of sub-prime assets as well holdings
in Structured Investment Vehicles (SIVs). According to the FSC, as
of October 25, Taiwan bank holdings of these two asset classes
totaled NT$78.1 billion (US$2.4 billion), including NT$21.8 billion
(US$0.67 billion) in SIV products. The value of sub-prime based
assets was NT$56.3 billion (US$1.7 billion), up from NT$40.4 billion
(US$1.24 billion) reported in early August. The increase was mainly
due to banks' new disclosures of assets already on the books, rather
than from an increase in holdings.

FSC Says Reserves Sufficient
----------------------------
3. FSC Vice Chairman Susan Chang told the press Taiwan banks
holding these assets have set aside sufficient reserves to absorb
likely losses. The holdings of these two asset classes, at only 3%
of the sector's total portfolio investment, are relatively small.
According to FSC estimates, likely losses will be NT$7 billion
(US$215 million), including NT$3 billion (US$92 million) in
sub-prime based products and NT$4 billion (US$123 million)in SIVs.


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