Taiwan's adoption of the internal ratings-based (IRB) measurement for risk-weighted assets (RWAs) will be positive for credit growth and banks' net profits, Fitch Ratings said in a Tuesday release.
The measure will also have a narrow impact on the banks' intrinsic credit profiles, Fitch said.
Taiwan's securities market regulator allowed the approach's adoption for six domestic systemically important banks and E. Sun Bank for a phase-in that will run from 2026 to 2031.
The approach limits annual RWA reductions at 5% of RWAs under the standardized approach and enables the gradual reduction of the output floor to 72.5%.
The seven banks' cumulative operating profit-to-RWA ratio should increase by 0.1 to 0.2 percentage point from 2026 to 2027, with a steady or modest rise in common equity Tier 1 ratios, according to Fitch.