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Derivatives

Taiwan Bank Readies CDO Debut

Taishin International Bank, with a market capitalization of over TWD30 billion (USD859 million), is gearing up to make its first investment in synthetic collateralized debt obligations. "This will allow us to diversify our portfolio," said Eric Chien, head of the treasury department in Taipei. The move follows the bank's merger with Dah An Commercial Bank earlier this year.

It will likely make its first investment of around USD10-20 million before year end and invest in portfolios referenced to U.S. and European credits in order to diversify its exposure, said Chien. It is also focusing on the single A and higher tranches of risk.

The bank has spoken to several CDO houses, including Deutsche Bank, JPMorgan, and Société Générale, according to Chien. "The basic ideas are pretty similar."

Taishin currently invests in credit-linked notes and credit-default swaps and has applied for a license to distribute credit derivatives to its clients in Taiwan. It expects approval in the coming months, said Chien.

Prakash Krishnan, spokesman at Deutsche Bank, and Melody Jeannin, spokeswoman at Société Générale, declined comment. Kathleen Kenney Lucente, spokeswoman at JPMorgan, did not return calls.

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