After currency turmoil, Taiwan’s central bank warns banks to follow forex rules

TAIPEI: Taiwan’s central bank said on Friday that banks should follow foreign exchange settlement rules, after the Taiwan dollar notably strengthened last week and earlier this week.

The Taiwan dollar on Monday and last Friday appreciated strongly against the greenback on market speculation that the U.S. had asked Taiwan to allow its currency to appreciate as part of tariff talks.

Both the central bank and Taiwan President Lai Ching-te denied that the Taiwan dollar was part of talks with the United States, and the currency has since steadied.

In a statement on its website, the central bank said that it urged banks to “fulfil their guidance duties” for their customers when it came to accepting foreign exchange settlements.

When accepting large-value Taiwan dollar settlement transactions, banks should confirm that the relevant supporting documents are consistent with the “declared nature of the transaction”, it added.

For handling Taiwan dollar forward exchange transactions, banks should check the “reasonableness, relevance, and practicality of the transaction documents and financial flows at the time of contracting”, the central bank said.

It added that it had recently conducted on-site inspections at banks which revealed that some companies or individuals had remitted funds in the name of foreign loans for settlement in Taiwan dollars, but there was “no actual use of the funds in Taiwan dollars”.

It did not name the banks it had inspected.

Taiwan’s central bank has a mandate for the currency’s stability, and generally does intervene as needed to ensure its movements either way are not excessive.