TAIPEI Nov 7 (Reuters) - Taiwan will put a cap on the total amount of yuan bonds mainland financial institutions will be allowed to issue on the island, sources with direct knowledge of the matter said on Thursday.
The Taiwan government has reached a consensus to let Chinese state-owned banks to issue yuan bonds, according to one source. International banks already have permission to issue what are called "Formosa bonds", the equivalent of Hong Kong's issuance of yuan-denominated paper known as dim sum bonds.
On Thursday, a local media reported Taiwan will allow Chinese companies to issue such bonds by the end of the year. Also, the chairman of the government's Securities and Futures Institute, Wu Soushan, said China Development Bank (CDB) will probably be the first mainland institution to issue Formosa bonds.
Taiwan's Financial Supervisory Commission has said only that the issuance of Formosa bonds by mainland financial institutions is still in the planning stage.
In putting a ceiling on how many bonds mainland financial institutions will be able to issue, Taiwan might take a cue from how the yuan bond market has developed in Hong Kong, the sources said.
Currently, bonds issued by China and other foreign institutions, as well as national debt and dim-sum bonds, are equal to about 40 percent of total yuan deposits in Hong Kong.
As of early October, yuan deposits in Taiwan topped 100 billion yuan. If Taiwan were to impose a ceiling for bond-issuance of 40 percent of deposits, the maximum level of Formosa bond issuance would be 40 billion yuan.
(Reporting by Lin Miao-jung and Roger Tung; Writing by Faith Hung and Michael Gold; Editing by Richard Borsuk)