Taiwan regulator penalises Bank SinoPac over derivative sales

TAIPEI, April 28 Mon Apr 28, 2014 7:41am EDT

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TAIPEI, April 28 (Reuters) - Taiwan's market regulator said on Monday a local bank will be barred from issuing new foreign-exchange derivatives products for one year for failing to disclose the risks associated with such complex investments.

The Financial Supervisory Commission, in a statement, said the ban is being imposed on Bank SinoPac, a unit of SinoPac Financial Holdings Co Ltd.

The move comes amid losses investors have suffered after a recent decline of the Chinese yuan. Bank SinoPac had not properly hedged against foreign currency falls or warned clients of the potential for depreciation, according to the statement.

"The bank did not sufficiently assess the ability of clients to withstand risks associated with their investments," the statement said.

Officials at SinoPac Financial were not immediately available for comment.

Earlier this month, FSC chairman William Tseng said a local bank would be punished for aggressively promoting complex derivatives, but he didn't name the institution. In March, the commission flagged potential risks associated with a more volatile yuan.

Though the FSC statement did not mention any foreign currency, one official who insisted on anonymity said the punishment stems from Bank SinoPac's sales of yuan investment products.

Taiwan's banking ties with China have expanded in the last few years, with both sides signing a yuan-clearing agreement and allowing local banks to take yuan deposits starting in February.

Yuan deposits in Taiwan surged to 268.4 billion yuan ($43.16 billion) at of the end of March, according to the latest figures from the central bank. (Reporting by Michael Gold and Emily Chan; Editing by Richard Borsuk)

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