Turbulence in Taipei

Taiwan has a reputation as one of Asia’s more open financial markets. But a Supreme Court ruling last year that raised concerns about the enforceability of close-out netting and new regulatory changes that have impeded the ability of banks to offer retail structured products to Taiwanese end-users are threatening that reputation. By Jing Gu

The Polaris case
In December 2008, the Taiwan Supreme Court ruled on a dispute related to damages payable upon early termination of an interest rate swap between Polaris Securities Co and Vic-Dawn Enterprise Co, following a default by the latter, an electronic components manufacturer. This has given rise to some concerns in the market regarding whether close-out netting will be enforceable in Taiwan after the judgment.

Polaris entered into the transaction documented under a 1992 International

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