|
Since 1995, the government opened up the money market to allow formation of new bills finance companies, there were 16 bills finance companies at peak. However, at the end of 2011, there are only 8 independent bills finance companies still in the business. The rest of them, mainly because of the inefficient operation, were merged into its own conglomerate or holding companies. We can also observe that the bills finance markets have gradually deteriorated and encountered visibly market shrinkage. With the purpose of overcoming operation difficulties, practitioners in the business spend abundant money and other resource into developing new product lines. In 2010, the government finally agreed the new operation of the US dollar bills. The bills finance companies look forward to the new business and believe the US dollar bills could significantly increase the bottom-line for the industry. Within a year since the new products, however, the number of transactions reduced significantly. It is undoubtedly important to find the major variables which caused the deterioration of USD bills market, thus we decide to conduct more research and discussion via this research.
The following article begins with the current development and operation of bills finance companies, and also the initiation process of the USD bills in Taiwan. The research of clients‘ motivation and cost efficiency in issuing USD bills was illustrated by three cases actually underwritten by IBFC. The research result shows considerable numbers of factors which impact the USD bills market. Although Taiwan is an export-oriented economy, US dollars are not circulated domestically. The US dollars conversion is supervised under the government foreign currency regulation. Other related financial environment change, such as interest rates and foreign exchange fluctuation will affect the cost efficiency of USD bills insurance as well. The limitation of foreign currency conversion, restriction of over-night lending between counterparties, methods of foreign currency hedge, and credit ratings system are additional issues need which to be solved, in order to improve the efficiency of USD bills market.
|