FSC fines two more banks over TRF trading

The Financial Supervisory Commission (FSC), the top financial regulator in Taiwan, said on Thursday that it has imposed fines on two banks for malpractice in the trading of target redemption forwards (TRFs).

This is the fourth time the FSC has fined banks for malpractice in the sale of risky TRF to local investors since April 2014.

The latest two banks, DBS Bank Taiwan and Taishin International Bank (台新銀行), face fines of NT$10 million (US$313,480) and NT$8 million, respectively, the FSC said.

TRFs are a type of option with a better rate of return but also higher risks, that have become popular in Taiwan as investors pursue greater profits. However, the sale of this financial derivative product sparked an outcry after the Chinese yuan plunged against the U.S. dollar, resulting in massive losses for investors who bought TRFs, which bet on a higher yuan.

Some banks have even falsified financial statements for corporate customers to hide their TRF trading losses.

According to the FSC, the two latest banks to fall afoul of the rules violated regulations requiring strict internal controls and comprehensive operational processes, when selling TRFs. For example, they failed to inform customers about possible risks associated with TRF trading, consider customer financial backgrounds or loss tolerance.

The FSC has now imposed fines of NT$72 million on 16 banks for inappropriate TRF selling practices.

This is the second fine for Taishin Bank for TRF trading, which had been fined NT$4 million previously. As a result, the bank has now been fined NT$12 million, the highest of any financial institution in Taiwan.

Cathay United Bank (國泰世華), Taipei Fubon Commercial Bank (台北富邦銀行) and DBS Bank Taiwan have each been fined NT$10 million, followed by CTBC Bank (中國信託銀行) with NT$8 million and Ta Chong Bank (大眾銀行) and Jih Sun International Commercial Bank (日盛銀行) with fines of NT$4 million, the FSC said. In addition to a financial penalty, Bank SinoPac (永豐銀行) was banned from selling TRFs for one year in April 2014 for sales malpractice.

The dramatic depreciation of the Chinese yuan has resulted in a series of disputes between banks and their customers, resulting in the FSC instructing banks to settle such cases as soon as possible.

The FSC said that to date 116 TRF trading disputes have been settled, accounting for 57 percent of the total.

Source: Focus Taiwan News Channel

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