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Yen denies troubled loans approaching 10 percent

Add it up * The average non-performing loan ratio for the nation's banking sector is 6.2 percent. * Not included in the government's official tally are loans that have been granted extensions, which are classified as "under surveillance." * If those NT$200 billion in loans are added, the nation's non-performing loans ratio would probably be 8.2 percent.

Ministry of Finance officials denied yesterday reports that the nation's non-performing loan ratio was approaching 10 percent.

According to Yen Ching-chang (顏慶章), minister of finance, if NT$200 billion in loans that have been granted extensions are included in the government's official figures, the final tally is 8.2 percent -- still shy of the 10 percent figure claimed by some media reports.

The average non-performing loan ratio for Taiwan's banking sector is 6.2 percent, Yen told lawmakers yesterday. Adding loans that have been granted rollovers, the figure would be 8.2 percent, he said.

Currently, loan extensions are not considered by the government to be "non-performing" and are instead classified as "under surveillance."

According to a senior official from the finance ministry's Bureau of Monetary Affairs, loans under surveillance are included with non-performing loan data, which is calculated differently country by country.

"There is no international standard for measuring non-performing loans, [which is] not a standard accounting principle," said Joseph Tsai (蔡慶年), deputy director of the bureau.

Tsai said the ministry kept track of loans "under surveillance" to more accurately reflect the quality of Taiwan's banking assets.

The banking controversy erupted over a local media report that the finance ministry recently informed local banks through the Bankers Association (銀行公會) that loan extensions to hundreds of companies with financial difficulties should be listed as non-performing loans -- even if interest payments are being made.

New Party legislator Lai Shyh-bau (賴士葆) questioned Yen on the issue yesterday. But Yen denied that the ministry had issued a directive to redefine loans under surveillance as non-performing.

"The definition of non-performing loans in the banking sector is currently under discussion between the ministry and the central bank. It's impossible that the ministry would revise the definition independently and then notify the banking sector," Yen said.
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