An official at Taiwan Ratings Corp (中華信評) yesterday criticized the government's failure to include loans for troubled companies that have been rolled over in the nation's non-performing loan figures.
"Not including doubtful loans in NPL statistics disguises the true extent of banking problems, and deprives regulators, investors, depositors, counterparty banks and institutional borrowers of reliable information upon which to base their decisions," Chris Irwin, vice president of Taiwan Ratings, said yesterday.
Irwin made the comments after local media reported the disbanding of a Bureau of Monetary Affairs task force formed late last year to oversee banks that roll-over loans for ailing companies.
While banks were told of the plan, the media was never informed of the decision. The move is significant since it may imply the era of state-directed loan roll-overs has ended, a policy that has been routinely criticized.
In late 1998, the KMT administration asked banks to extend loans to troubled companies. The Chen Shui-bian (
Hsu Ming-chi (
But the problem has since expanded to an estimated NT$300 billion in bad loans that are not included in the finance ministry's NPL classification, Chinese-language media reported yesterday.
Non-performing loans for the banking sector are already estimated to top NT$1.6 trillion. Irwin said the move was "constructive."
"Requiring accurate disclosure will encourage discipline: If you know you'll have to categorize a bad loan as a bad loan, you'll probably be less likely to relax your credit standards," he said.
The move also puts decision-making on loan extensions back with the banks. "The banks probably have a pretty good idea of which loans will be repaid and which won't," Irwin said.
Hsieh Chao-nan (
"This will allow market mechan-isms to work things out. Now banks will have to make their own decisions," Hsieh said. "Chang Hwa will now only extend loans to companies that have maintained normal business operations and can make regular interest payments."