Taipei-based Bank SinoPac, with over TWD313 billion (USD9 billion) in assets, is gearing up to establish an interest-rate options book by the second quarter. "While interest rates are low, demand from corporates will come up any moment there is potential for upside risk," said Henry Chang, head of fixed income and derivatives. He explained that with a possible improvement in the U.S. economy next year, it now makes sense to ready the product in case of any rates rises. SinoPac will look to offer Taiwan-dollar denominated instruments, including caps and floors.
Chang also said he is wanting to purchase credit default-swaps this year to hedge a portion of its USD4.5 billion loan portfolio. The bank has studied the products since last summer (DW, 8/4) but has not pulled the trigger yet as it is waiting for greater liquidity.