Taiwan's Financial Supervisory Commission (FSC) has said that it will soon accept letters of credit (L/Cs) and bank guarantees issued by mainland Chinese banks as collateral.

The financial instruments may be presented as collateral as early as this October, although no fixed date for the move to be implemented has been fixed.

Easier credit

The FSC says it wants to make L/Cs and bank guarantees acceptable as collateral so that Taiwanese banks can extend credit more easily to businesses in China in which there are Taiwanese investments.

The move will help such businesses obtain credit at a time when China's credit policy is very tight.

More benefits

The move is also aimed at helping mainland Chinese branches of Taiwanese banks to expand their business.

It could also allow Taiwanese banks to provide more loans to other Taiwanese and mainland Chinese banks.

Acceptable banks

Taiwan currently acknowledges as collateral only L/Cs and bank guarantees issued by foreign banks with Taiwanese branches or banks ranked in the top 1,000 global banks.

Banks on the Chinese mainland currently fall beyond this scope.

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