Wed, Dec 24, 2003 - Page 10 News List

Banks near targets set for bad debt

PAYBACK The Ministry of Finance said it was pleased banks had written off so much bad debt, helping them near the target of a 5-percent bad-loan ratio

By Joyce Huang  /  STAFF REPORTER

The Ministry of Finance yesterday heralded the progress banks are making in aggressively writing off non-performing loans (NPLs), as the nation's bad-loan ratio nears the government's target of 5 percent.

"As of the end of November, the nation's NPL ratio has been successfully lowered to 5.01 percent, or NT$716.9 billion," Gary Tseng (曾國烈), director-general of the ministry's Bureau of Monetary Affairs, told a year-end press conference yesterday afternoon. In the first quarter, the NPL ratio was 8.04 percent.

Tseng said that NT$194 billion in bad loans had been written off over the past 11 months, adding that the banking sector was likely to meet some of the government's 2:5:8 goals by the year's end.

In August last year, President Chen Shui-bian (陳水扁) vowed to reduce the nation's non-performing loan ratio to below 5 percent and raise the banking sector's capital adequacy ratio to above 8 percent within two years.

However, if loans under observation are included, the bad-loan figure stands at 7.02 percent, or NT$1 trillion, as of last month.

According to Tseng, 34 out of the nation's 51 domestic banks have complied with the government's policy and lowered their bad-loan ratio to below 5 percent. He said the government would reward the 34 banks.

The bad-loan ratio of nine domestic banks, however, remained at between 5 and 10 percent, while that of eight domestic banks exceeded 10 percent, he added.

The ministry, therefore, would impose penalties on these 17 banks, Tseng said.

But the penalties could be reduced if those banks have written off bad loans by 3 percentage points, he added.

The ministry was originally scheduled to fully adopt stricter international NPL standards by July 2005, although banks have been required to detail the ratios of their NPLs and loans under observation since April.

Taiwan's NPL definition excludes loans for which interest payments haven't been made for up to three months. Loans that have gone unpaid for six months are listed as non-performing.

Tseng yesterday vowed to help with the regulatory changes, saying that the bureau would soon finalize the new NPL definition and make it public in early January so that banks would be able to prepare for the new standards.

"During the transitional one-and-half years, hopefully the impact will be greatly reduced for business lenders," Tseng said.

To accelerate the nation's financial reforms, Tseng yesterday reiterated his concerns over the delayed passage of the Financial Restructuring Fund (金融重建基金) bill in the legislature.

"The more the bill's passage is delayed, the more it will cost the government to deal with troubled banks," he said.

Meanwhile, the bureau is considering measures to facilitate the niche market of banks' offshore banking units (OBU) as a capital center for overseas Taiwanese businesses, including China-based Taiwanese businesses, Tseng said.

To expand the OBUs' business scope, the bureau is expected to soon relax restrictions to allow their subsidiary direct banking units (DBU) to manage some OBU transactions, such as foreign-currency deposits, so that Taiwanese businesses can take advantage of DBUs and OBUs to meet their financial needs, he said.

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