TAIPEI, May 2 (Reuters) - Taiwan’s financial regulator has warned banks it will treat improper derivative contracts as fraud as it scrutinises the rapid growth of structured derivative products tied to the yuan, local media reported on Friday.
The warning is the Financial Supervisory Commission’s latest move in a week the FSC said it will penalize three more banks, after already punishing the banking unit of Sinopac Financial Holdings for failing to disclose risks associated with structured yuan derivatives..
The Economic Daily said the FSC chairman would meet with the presidents of Sinopac and the three other banks, and does not rule out removing them from their jobs if their institutions continue to sell suspect yuan products.
The FSC wrote to banks on Thursday, the Economic Daily reported, instructing them to analyse yuan products properly and fully disclose the risks in fair contracts with customers, the paper said.
Officials of the FSC were not immediately available for comment.
Since Taiwan and China signed a yuan clearing agreement last year, yuan deposits in Taiwan have grown rapidly. Such deposits reached 268.4 billion yuan ($42.88 billion)at end-March, up almost 9 percent on month, according to the latest data from the central bank.
$1 = 6.2593 Chinese Yuan Reporting by Faith Hung; Editing by Eric Meijer