Overdue loan ratios for financial institutions nationwide reached a new high at the end of June, the Ministry of Finance said Monday.
According to ministry figures, the total value of overdue loans for banking institutions at the end of the second quarter came to NT$850 billion.
The average overdue loan ratio rose to 5.93 percent.
For farmer's and fishermen's associations, the average overdue loan ratio climbed to 14.83 percent, an historical high surpassing levels reached during the financial crisis two years ago.
"It's a structural problem within the whole financial system," said Yen Ching-chang (顏慶章), deputy minister of finance, explaining the high figures. "The ministry has expressed its concern to the Executive Yuan over its initiative to improve the situation."
Yen said that when the overdue loan ratios of the farmer's and fishermen's associations are taken into account, the financial health of the nation's banks looks poor.
But excluding these institutions, the average overdue loan ratio at domestic banks was 5.05 percent -- a decline from previous levels.
"Therefore, we should not conclude that the entire banking industry is in trouble," Yen said.
The finance official also said that Taiwan's highly competitive banking environment in part explains the increase in overdue loan ratios.
According to the ministry's numbers, overdue loan ratios for domestic and foreign banks stood at 5.18 percent and 3.02 percent, respectively.
The value of overdue loans at domestic banks and trust companies was NT$649.3 billion. For foreign banks the figure was NT$11.8 billion. Farmer's and fishermen's associations had NT$194.9 billion in bad loans.
At the end of third quarter of last year the average overdue loan ratio was 5.82 percent. Tax measures benefitting the banking industry helped lower the ratio to 5.67 percent in the fourth quarter.
But now the ratio has climbed back to 5.86 percent and 5.93 percent in the first and second quarter of this year, respectively.
The Ministry of Finance has asked banks to get their overdue loan ratios down below 2.5 percent, and the tax measures were supposed to help banks reach that goal.
The ministry may restrict any application for the establishment of new branches or businesses of any institution that fails to reach the 2.5 percent goal.
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