Following the Bankers Association (銀行公會) announcement last week that it would rollover loans to troubled corporations for another six months, Minister of Finance Yen Ching-chang (顏慶章) said the move would provide a soft landing for troubled companies and also lessen unemployment pressure.
Asked by lawmakers about the asset quality of the banking industry in response to the loan rollover decision, Yen said "the ministry's measure is not for saving the owners of these firms, but to help the laborers who work in these troubled companies.
"If these firms went down, these workers would be out of job. Therefore, when the ministry accepts applications for loan extensions, we require that these firms are operating normally and making interest payments regularly. If the owners are selling their company assets for personal profit, their applications are rejected. There have been a number cases where the applications have been rejected," Yen said.
"The ministry asked the banking industry not to shrink credit lines to firms with normal operations, but only those have difficulty paying interest on loans. However, we have no way to ask banks to further extend more loans to these firms. Short-term loans that have been given to these firms," he said.
On the issue of the extension of interest payments on mortgage loans for the unemployed laborers, Yen said that both the principal and interest on such loans could be extended, provided the laborer is under unemployed status.
"According to the report submitted by the Bankers Association, both the principal and interest of mortgage loans by unemployed laborers would be extended for six months. After the six months, both of these amounts would be accumulated into principal, and accrued in future monthly mortgage payments," Yen said.
"However, if there is more than one mortgage loan, only one could be extended."
Yen said last Tuesday that the administration would not intervene in the banks' the loan extension policies for companies and unemployed workers. Such decisions would be left up to the banks alone, he said.
Market watchers said it's unlikely that the government actually takes a neutral stand on the issue. Since state-controlled banks have dominated the membership of the Bankers Association, its policy therefore is more likely to be determined by the ministry.
The gesture that Yen made before association's announcement on Tuesday was a way for the administration skirt any blame for the bad loan problem, which is likely to increase with the loan extension program, analysts said.
"It's unlikely that the government would take a neutral stand on the [loan extension] issue," said Liu Kai-pin (
"Since state-controlled banks dominate the membership of the Bankers Association, the association's policy is more likely to be controlled by the finance ministry.
"The gesture that Yen made before Banks Association's announcement on Tuesday was a ploy so that the administration does not have to take responsibility for an increase in bad loans as a result of the program," Liu said.
"The scheme could only fool the general public," said Henry Cheng (鄭百亨), managing director of Manulife Funds Direct.
"Without prior consent from the finance ministry, the Bankers Association could not make any important decision, Cheng said.
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