Taiwan banks feel the heat of TaiFX-Libor gap

Local dollar funding costs for Taiwanese banks are spiralling upwards, with three month TaiFX increasing from 90bp in early December to 148bp on February 19. The rate is now roughly 125bp wider than Libor, hurting lenders who are struggling to make profits on international syndicated loans. There is little chance of respite soon. If the gap continues to widen, it could prompt banks to invoke market disruption clauses, writes Rashmi Kumar.