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Siew to ask for deregulation of banks

"Business credit is such an abstract indicator that bank officials may find it hard to measure when it comes to offering loans."

Chou Tein-chen, an economics professor at National Taipei University

The president's top economic advisor, Vincent Siew (蕭萬長), yesterday said that he will soon ask the government to deregulate the banking sector's credit policies, in order to help traditional industries and small and medium-sized businesses raise loans.

"Banks should allow companies to collateralize their business credit while granting loans, in addition to traditional collateral such as real-estate properties and company assets," Siew told reporters yesterday.

Siew was nominated last month by President Chen Shui-bian (陳水扁) to head a four-member presidential economic advisory panel.

At a seminar on transforming Taiwan into a global logistics center yesterday in Taipei, Siew said the management board of the Small and Medium Business Credit Guarantee Fund (中小企業信保基金) is expected to hammer out "a new rating mechanism to review business credit," which will be used by banks as a reference for granting loans.

The fund is currently under the management of the Ministry of Economic Affairs.

Siew said that the new credit policies will help boost the nation's industrial development.

To elaborate on Siew's economic proposal, Jan Yih-yaw (詹益燿), the fund's executive vice president said yesterday that business credit refers to creditors' newly developed business models, expertise and management.

It also involves creditors' future prospects and competitiveness as well as human resource capital if they are bankable.

Currently, the 200-staff fund is in its initial stage to embody Siew's proposal, Jan said.

"The yet-to-be-established [business credit] mechanism may open up a new financial channel for knowledge-based businesses to obtain loans more easily," he said.

If a mechanism of rating how credit-worthy the prospective businesses are is in place, Jan said that his institution may begin to issue credit-guarantee certificates, which enable companies to get loans from other banks.

Upon receiving the government-backed credit-guarantee certificates, banks should be able to dismiss their concerns over risks of generating bad loans that these businesses may incur and thus make their credit policies flexible.

But Chou Tein-chen (周添城), an economics professor at National Taipei University, yesterday expressed his doubt about the mechanism's feasibility.

"Business credit is such an abstract indicator that bank officials may find it hard to measure when it comes to offering loans," Chou said, adding that the mechanism appears well-intentioned, but difficult to implement.

The to-be-deregulated credit policies may not benefit traditional industries and small and medium-sized businesses since their credit is mostly rated to be below average, Chou said.

The economist, moreover, said that the deregulation move will further trap the administration in a dilemma, where it reverses its efforts to tighten up the banking sector's control over non-performing loans by loosening up credit policies that may generate new bad loans.

Siew, also said that he will urge the administration to push forward urban renovation projects in order to reinforce the nation's infrastructure construction and boost private investments by inviting the private sector to take part.

Meanwhile, Siew reiterated that Chen has accepted his proposal to facilitate direct chartered cargo flights between Taiwan and China.

Siew refused to say how soon the cross-strait cargo links will be implemented, but added that the Mainland Affair Council is working on it.
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