TOKYO, JAN. 15 (TUESDAY) -- Taiwan, one of the world's largest holders of foreign exchange reserves, has reduced much of its holdings in U.S. commercial banks because of its concerns that a Persian Gulf war could exacerbate recession and bank problems in the United States, according to Taiwanese press reports.
Some of the island nation's reserves have been moved to accounts at the U.S. Federal Reserve System and some to banks in Europe, Japan and Australia, the reports said.
In a telephone interview, Samuel Shieh, governor of Taiwan's central bank, said the central bank's actions have involved nothing more than "routine" transfers of funds. But Peng Hui Nan, director general of the foreign exchange division, was quoted by the China Times as saying that the central bank had "adjusted" its reserves deposited in U.S. bank because of the threat of war and U.S. economic problems.
Central bank officials reportedly said that of Taiwan's $73 billion in reserves, about $35 billion has been moved from U.S. commercial banks since late 1990, and only small amounts are now being kept in those banks to maintain business relations.
Such a shift would appear to represent a surprising vote of no confidence in the U.S. financial system. U.S. officials and private bank analysts have been virtually unanimous in agreeing that while American banks are facing severe difficulties, the chances of widespread major bank failures are almost nil.
But Shieh was quoted by the English-language China News as saying: "The U.S. economy is in more of a shambles than you can understand, and war will prolong the recession."
In the interview, Shieh indignantly described the press reports as "speculative." Any central bank, he said, "maintains routine operations, moving money from here to there," and that is all that is involved in the latest Taiwanese actions. He also contended that any statements attributed to anonymous officials of the central bank should be suspect.
But he refused to either deny or confirm the reports. "I did not say false; I said speculative," he said, adding that the amounts involved in the transactions are "a banking secret."
In the interview, Shieh said "it is a fact" that the U.S. economy is facing difficulties. But he disputed the suggestion that he has lost confidence in the United States, or its banking system, saying that America "is still a great country ... the largest economy ... very powerful in the high-tech industry ... Your banking examination system is also one of the best."