In response to a proposal made by five major business groups, the Bankers Association of the ROC (
"Our Thursday meeting concluded that the mechanism, which is due to expire in January, will remain active for one more year," an association official, who requested anonymity, said yesterday.
The mechanism allows member banks to make their own decisions on whether they will extend loans -- due to be repaid this month -- until next year.
However, the association rejected a proposal, also made by five major business groups, to mandate that banks allow rollovers, the official said.
According to the official, the optional rollover proposal passed Thursday by a 23-17 vote. Those supporting the proposal argued that many enterprises in traditional industries will still be in need of capital even in the event of an economic recovery.
Through the negotiation mechanism, nearly 70 loan rollovers have been granted over the past three years to businesses whose loans are still performing, the official said.
In accordance with the mechanism's rules, businesses that are having difficulty repaying bank debt will be entitled to call for a meeting with banks participating in syndicated loans to discuss terms of a loan rollover.
The association also revised its rules concerning voting procedures on rollover decisions. Previously, meetings on rollovers required a quorum of two-thirds of the banks participating in a given syndicated loan. Rollovers had to be approved by three-fourths of banks attending the meetings. The association yesterday simplified the rules, which now merely require consent from more than half of the banks attending a meeting, the official said.
The rollover mechanism has existed for over three years.
Hsu Chen-ming (
"These debts are considered loans under observation, which are very likely to go into default eventually," Hsu said, saying that the practice has put extra burdens on the nation's banking sector and has hindered efforts at financial reform.
Taiwanese lenders wrote off a combined NT$413.9 billion (US$11.9 billion) of bad debts last year as they accelerated the process of cleaning up their books by removing non-performing loans from their balance sheets. The percentage of bad loans in the banking sector fell to 7.87 percent as of Sept. 30, from 7.97 percent at the end of June.
At the end of September, about NT$1.12 trillion (US$32.9 billion) of loans were classified by the nation's central bank as non-performing and under surveillance. That compares with NT$1.13 trillion at the end of June.
Hsu also said that distressed businesses should be encouraged to undertake restructuring to turn performance around, and should not be granted loan rollovers.
"Measures such as takeovers, board and management reshuffles and streamlining will be effective in helping improve businesses, not loan rollovers," Hsu said.
Hsu sat on the board that oversaw the rollover mechanism when former president Lee Teng-hui (
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