Chinatrust Commercial Bank, one of Taiwan's largest banks with around TWD849 billion (USD25 billion) in assets, is planning to issue the first Taiwan dollar-denominated synthetic collateralized debt obligation and is discussing co-structuring the deal with international banks. "We're putting more resources into this product," said Gloria Hsu, v.p. in the product development group in Taipei, noting that the bank is looking to structure three CDOs next year referenced to onshore credits in the domestic currency. "It will probably be a first," said C.G. Lai, head of fixed income at BNP Paribas in Taipei. The French bank is not currently signed up to structure the deal, but Lai said it will likely speak with Chinatrust about these types of instruments.
Chinatrust is talking with several global firms about CDOs, but Hsu declined to name houses. "Several international banks are interested in this market, but it's not easy as it's still in the early days," she added.
Chinatrust recently began speaking to and educating its customers regarding the product and believes it will close its first transaction within six months. The first CDO will likely be around TWD5 billion, explained Hsu.
The bank obtained its credit derivatives license earlier this summer (DW, 6/15) and has started marketing credit-linked notes and deposits. "Chinatrust is becoming more aggressive," said one market official, noting that earlier this year the bank hired several senior banking executives from Citigroup in Taiwan to restructure the business.
Market professionals in Taiwan expect the CDO market to gain traction in the coming months. The onshore credit market opened up at the onset of the year (DW, 1/26). Major derivative players such as BNP and Deutsche Bank have been looking to import dollar-denominated CDOs, as they can be structured in larger sizes and offer greater diversity than local currency denominated products.
