The central banking authority said yesterday that the nation's retail banking is in good shape, in an attempt to soothe growing concern over the potential of a bad-loan crisis caused by credit cards and cash-advance cards, as was the case in South Korea.
"It is be impossible to see in Taiwan the emergence of bad loan problems with credit cards and cash-advance cards to damage financial systems," said Gary Tseng (
Credit lending by credit cards and cash-advance cards amounted to about NT$800 billion, or only a minimal proportion of less than 5 percent of total lending in Taiwan last month, Tseng said.
Also, Taiwan's gross domestic production (GDP) per capital was NT$46,400 last month, higher than South Korea's NT$30,300 in 2001 when its bad loan crisis happened. Also, the nation's spending per card per month at NT$2,583 and cash advance amount per card per month was at NT$407, far lower than South Korea's NT$12,408 and NT$7,491, the official explained.
Taiwan's spending per card per month accounted for 7 percent of GDP per capital, only one-seventh, compared to South Korea's 49 percent, according to the bureau.
Improvements in transparency, a strengthened verification system for card applicants and a graded financial supervision mechanism with the most serious punishment to suspend banks from issuing new cards could effectively prevent a bad loan situation from occurring, Tseng said.
As of last month, Taiwan saw 4.56 million credit cards in circulation issued by 51 financial institutions with an evolving credit amounting to NT$488.3 billion. Non-performing loan (NPL) ratio edged up by 0.03 percentage points to 2.23 percent from August, the banking bureau said.
Meanwhile, there were 3.73 million cash-advance cards in effect issued by 33 banks with lending amount totaling NT$315.2 billion. The NPL ratio increased by 0.51 percentage points to 2.11 percent from a month ago, it said.
Last month's bad loan ratio of local bank slid by 0.03 percentage points from a month ago to 2.80 percent, while the amount of default loans increased another NT$1 billion to NT$455 billion.
"This means the condition of local banks is largely improved, compared with the highest NPL ratio of over 11 percent [seen in the first quarter of 2002]," the commission's spokesman Lin Chung-cheng (
As many as 22 out of 47 domestic lenders had a decent bad loan ratio under 2.5 percent last month, the banking bureau said. Local banks' risk bearing abilities was enhanced with the average bad loan coverage ratio jumped to 41.40 percent from 40.37 percent over the same time.
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