Deutsche Bank and Credit Lyonnais are preparing separately to close the first Taiwan-dollar denominated credit derivatives in Taipei as they recently received dealing licenses from the Ministry of Finance. "This is a natural route for the market's development," said Bryan Yap, co-head of emerging markets-Asia; fixed-income and derivatives trading in Singapore. A marketer at JPMorgan in Taipei said the firm is currently in the process of applying for such a license, declining further comment.
"We're targeting clients that are looking to pioneer these products," said an official at Deutsche Bank. The official continued that domestic banks will likely be among the first clients, as they will look to sell protection for yield kickers as well as buy credit-default swaps for their loan portfolios. Typical sizes will likely range around USD10 million. The German bank is also marketing credit-linked notes. Currently foreign banks market credit derivatives to Taiwanese clients offshore in foreign currencies.
"With local issuance picking up over the last year or two, along with securitization as the next wave, it's not unrealistic to assume that credit derivatives is the next development," said Yap. Deutsche Bank is gearing up an educational campaign in Taiwan to familiarize end-users with the products, along with documentation and accounting procedures. "There will be a combination of seminars and client visits," added Yap.
