The average overdue loan ratio of the nation's domestic banks hit a record high of 6.25 percent at the end of September, up significantly from 5.93 percent at the end of June, the Ministry of Finance (
A preliminarily estimate by the ministry put the amount of total outstanding overdue loans at more than NT$950 billion.
Both of these figures are new historical highs in Taiwan's banking industry.
According to the ministry's Bureau of Monetary Affairs (金融局), the overdue loan ratio among Taiwan's financial institutions -- including the farmer's and fishermen's associations and credit cooperatives -- has doubled since June 1995, when the figure stood at 2.57 percent.
The highly troubled grassroots financial institutions saw their overdue loan ratio grow five-fold since June 1995 to 15.57 percent at the end of September.
The bureau said the overdue loan ratio for financial institutions has been rising at a rate of between 0.7 and 0.32 percentage points per month since the beginning of this year.
The overdue loan ratio was 5.67 percent at the end of last year. It increased to 5.86 percent in the first quarter and 5.93 percent in the second quarter; in the third quarter it passed 6 percent and reached a historical high of 6.25 percent.
Overdue loans of foreign banks in Taiwan also ventured into record territory, with the ratio standing at 3.33 percent.
"Changes in the macroeconomic environment has made the operation of companies in traditional industries very difficult, and their financial situation has deteriorated," said Wang Yaw-shing (王耀興), director general of the Bureau of Monetary Affairs.
"Also, the pace of writing off bad debt by the local banking industry has been too slow. Coupled with intense competition between local banks, the interest rate spread has narrowed," Wang said.
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