Bank of America recently obtained an onshore credit derivatives license in Taiwan which it will use to market local currency credit products. Joey Wang, treasurer in Taipei, told DW the firm is gearing up to offer instruments such as credit-linked notes to institutional investors and banks. The bank has been looking to get into the market since last year (DW, 12/17).
Previously, Bank of America distributed U.S. dollar-based products but an onshore license will allow the firm to avoid ceilings for investors on foreign currency holdings via quanto-swapping structures into Taiwan dollars. Wang added the firm will also consider entering domestic CDS trading, though it will take a few years until a liquid market develops.
A handful of local and foreign banks including BNP Paribas and Deutsche Bank have obtained onshore licensing for credit derivatives (DW, 1/27/03). Houses have been actively selling local currency notes and CDOs, but to date onshore default-swap trading has remained limited.