The Taiwan Banker

During the April 3 earthquake, the 660-metric-ton golden damper stabilized Taipei 101, allowing Taiwan’s tallest building to once again overcome the challenge of seismic activity and continue facing the future. Taiwan is located in a typhoon and earthquake zone, and breakthroughs in construction technology have strengthened our ability to respond to natural disasters. But it is also in a hotspot for geopolitical conflict. Shouldn’t we also start restructuring our financial system, creating a financial damper as the foundation for the next stage of financial development? Looking at the international landscape, the current international order and financial system formed during the Cold War. After the collapse of the USSR, the US once took the lead in bringing stability and peace to the world. However, since the financial crisis, challenges to the existing order by China and Russia have eroded the foundation of global stability, causing European and East Asian countries which originally embraced the dream of peace to adjust their national defense directions. Similarly, Taiwan cannot take the aircraft and ships that harass our airspace and territorial waters every day lightly. We must remain vigilant for any possible resurgence of war. After all, besides national defense considerations, Taiwan’s economic development also relies on world peace. For example, our oil imports depend heavily on the Strait of Hormuz. Any disruption will cause self-evident economic impact. Moreover, whether a cold war or a hot war, any price fluctuations reflected in the financial market as volatility would certainly affect balance sheets, in turn affecting the overall stability of the financial system. However, our domestic financial risk research scarcely considers geopolitics. Taking the most important Financial Stability Report of the Republic of China as an example, the chapter “Environmental Factors Potentially Affecting the Financial System” still discusses the “international financial situation,” “overall domestic environment,” and “comprehensive assessment of the overall domestic and foreign environment,” with limited focus on geopolitical risks. Research by other domestic financial groups also focuses on industrial economic analysis, with limited discussion of geopolitical analysis and its effects on financial stability, let alone contingency plans. The complex implications of this year's US election, political decision-making related to China’s economic downturn, and Ukraine’s progress in its war for independence all relate to Taiwan’s financial stability. They are worthy of integrated analysis to provide guidance for Taiwan’s future, exploring possible risks and considering countermeasures tailored to Taiwan's large asset pool. Thus, TABF created a Financial Stability Research Center this year, with dedicated personnel to bring together professional thinking from all parties to draft contingency plans for different geopolitical risks. The Center also hopes to serve as a discussion platform between industry, government, and academia, overcoming the limitations of think tanks. Just like during the initial period of the pandemic, Taiwan’s earthquake resistance performance has amazed the world. In contrast, Taiwan’s financial industry is full of talent, and we sincerely hope to jointly build a “financial risk dampener” so that Taiwan’s financial system can improve its information collection, scenario simulation, and countermeasure drills in turn, strengthening Taiwan’s financial resilience. Of course, we must also hope that this risk dampener will never be used, becoming a useless relic for future generations to visit.