Print

Mail

wiki links

FSC defends flexible rates

"Consumers must clearly choose the products most suitable for their situations and be responsible for negotiating with banks if they find it difficult to pay back the money."

Gary Tseng, Financial Supervisory Commission director-general

A top Financial Supervisory Commission (FSC) official yesterday reiterated the importance of keeping lending rates flexible under the current regulatory ceiling in order to stem rampant underground financial activity.

"The Civil Code (民法) sets the cap at 20 percent. No one knows whether this is the best standard. But it reflects the risks and costs financial institutions have to sustain," said Gary Tseng (曾國烈), the commission's director-general, during the World Consumption Forum in Taipei yesterday.

The two-day forum sponsored by the Consumers' Foundation (消基會), which concluded yesterday, was held to mark the non-profit foundation's 25th anniversary.

Tseng said that under the 20-percent lending rate cap, banks are entitled to devise different consumer products serving various needs, from housing mortgages and car loans that carry lower rates, to unsecured financing through credit cards and cash-advance cards that come with higher revolving rates -- often in excess of 18 percent.

Because card issuers need to take into account operational costs, reserve funds for writing off bad loans and preparations for cardholder privilege programs, banks have to charge higher rates on plastic cards, he said.

Unhappy that banks are making "exorbitant profits" by failing to narrow the gap between lending rates and savings rates, Chinese Nationalist Party (KMT) lawmakers are planning to submit an amendment to the Banking Law (銀行法) and the Civil Code requiring that lending and revolving interest rates not exceed 10 percent.

Tseng said that if the government interferes with the free market mechanism, it would only end up fostering an environment conducive to loan sharks.

Taiwan's lending rate ceiling is not particularly high compared with Singapore (24 percent), Hong Kong (26 percent), South Korea (19 percent to 24.9 percent), the UK (35.9 percent) and the US (23.99 percent), according to statistics provided by the FSC.

"The more controls you place on money, the worse the situation will become," Tseng said in response to a foundation volunteer's comment that debt-ridden consumers had made despairing phone calls to the organization for help.

As of August, 400,000 people had defaulted on debts generated by credit cards, cash cards and unsecured loans that were overdue by more than three months, the FSC said earlier this month.

The nation's revolving interest on credit cards hit NT$488.3 billion (US$14.5 billion), or NT$10,705 per card in circulation, at the end of September. Total lending on cash cards surpassed NT$315.2 billion, or NT$84,504 per activated card, during the same period, Tseng said.

"Consumers must clearly choose the products most suitable for their situations and be responsible for negotiating with banks if they find it difficult to pay back the money," Tseng urged.
This story has been viewed 1682 times.