Table of Contents:
Summary Opinion 1
Rated Universe 2
Positive and Negative Rating Trends 3
Key Issues 4
Key system performance measures / BFSR drivers 6
Franchise 7
Risk Positioning 8
Profitability 9
Liquidity 10
Efficiency 11
Capitalization 11
Asset Quality 12
Joint Default Analysis and the Baseline Credit Assessment 13
Deposit Rating Drivers 14
Appendix I: Sovereign Credit Opinion 15
Appendix II: Global Comparisons 17

Summary Opinion
Moody’s sees a negative outlook for the Taiwan banking industry in view of the global recession. Meanwhile, the ratings outlook of Taiwanese banks and financial holding companies (FHCs) is largely stable, but may become susceptible to downward pressure if the recession deepens and is prolonged.
The negative industry outlook – as distinct from the ratings outlook – is predicated on Moody’s near-term expectation of a deceleration in the banks’ earnings power and constraints in strengthening capital position amid current extreme market condition.
As an export-driven economy, Taiwan has proven vulnerable to the weakening in global demand. Statistics showed a sharp contraction in its GDP in 4Q 2008, mainly driven by the slumps in exports and domestic investments. Taiwan entered the preliminary phase of the recession in 4Q 2008.