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Taiwanese Banks to Reduce NT$100B.in U.S. Bond Holdings

2011/11/01 | By Quincy Liang

Taipei, Nov. 1, 2011 (CENS)--Taiwan's domestic banks will reportedly reduce holdings of American bonds worth an estimated NT$100 billion (US$3.33 billion) due to the U.S. government's recent decision to impose 30% tax on foreign-investment income in U.S. securities as bonds.

Taiwan's eight government-linked banks reportedly hold U.S. financial products worth over US$2 billion, with Mega International Bank boasting the largest share of nearly US$700 million, followed by Bank of Taiwan with US$600 million. Taiwan Cooperative Bank and Land Bank of Taiwan have a share of US$230 million and US$100 million, respectively.

On April 8, 2011, the U.S. government issued a notice advising foreign financial institutions to meet certain obligations under the Foreign Account Tax Compliance Act (FATCA), under which foreign financial institutions are subject to complex reporting rules related to their U.S. accounts. Failure to meet such reporting obligations means the U.S. will impose a 30% withholding rate on certain U.S. source payments to foreign financial institutions.

Foreign institutions holding U.S. securities are required to ink FATCA with the U.S. government before June 2013 or be levied the said 30% rate starting 2014.

Accordingly, Taiwanese banks holding U.S. financial products have decided to lower the positions of such holdings.