FSC to relax rules for debt-ridden banks

The Financial Supervisory Commission yesterday announced a further relaxation of measures intended to aid debt-ridden banks.

The commission said it will allow banks with capital adequacy ratios that don't meet the government's 8 percent requirement and above-average non-performing loans (NPL) the option of selling some of their branches -- after they submit a restructuring plan.

"We hope the relaxation will facilitate problematic financial institutions that want to help themselves, which will in turn reduce the government's costs in dealing with these lenders," the commission's vice chairman Lu Daung-yen (呂東英) told a press conference yesterday.

This is the first time the nation's financial regulator has agreed to allow financial institutions to sell off some of their branches, instead of a blanket sale of all branches as before, Lu said.

According to the commission, a problematic bank seeking this option is required to submit to the commission a business and financial restructuring scheme, including recapitalization and asset improvement plans. After the bank achieves its first-stage recapitalization goal, it will be allowed to sell branches to other financial institutions. However, gains from the sale can only be used to write off defaulted loans or increase reserves to cover bad loans, Lu said.

Capital adequacy (also known as BIS ratio) is a measure of a bank's financial strength, usually expressed as the ratio of its capital to its assets. Some lenders have sought recapitalization to help increase their capital adequacy ratios to meet the government's 8 percent requirement.

Lu and other officials at the commission did not specify which lenders would be allowed the option to sell branches.

But according to data from the commission's Bureau of Monetary Affairs (BOMA), financial institutions that fit the requirement of having poor BIS and NPL ratios include the Taitung Business Bank (台東企銀), Bowa Bank (寶華銀行) and Hualien Business Bank (花蓮企銀).

The nation's NPL ratio, including loans under surveillance, fell to 3.77 percent in February, from 3.78 percent in January, according to the latest statistics provided by BOMA last month.