Banks may soon be asked to set aside more funds to cover potential loan losses, as part of stricter rules the government is considering, said Chang Ming-daw (張明道), deputy director-general of Bureau of Monetary Affairs, under the Ministry of Finance.
The new rules, to be announced by end of this month, will require banks to provide for between 0.5 percent and 100 percent of the loans they disburse, a local newspaper reported. The amount will vary according to the category of the loans, sorted into five groups, depending on their recovery chances.
"We are evaluating related regulations and no decision has been made," said Chang, declining to give details. Banks will be given time to adhere to the new rules to "cushion" them against a resulting increase in their capital burden, he said.
Taiwan's lenders wrote off a combined NT$413.9 billion (US$11.9 billion) last year as they accelerated a cleanup of their books, under government pressure to cut bad loans to less than 5 percent of their total lending by the end of this year, from 6.12 percent.
The nation's 52 lenders had a pretax loss of NT$104.6 billion last year, the first loss since the data was first compiled in 1994, according to the Bureau of Monetary Affairs' Web site.
A provision of between 50 percent and 100 percent for two of four categories of loans are now required.
RSS