Fitch Ratings yesterday said it had revised down the outlook ratings for Taishin Financial Holding Co (
It marked the first time that the British ratings firm has downgraded local financial institutions on growing concern over the spiraling defaults on credit and cash card loans, the company said.
"The revision reflects Fitch's general concerns over Taiwan's banking system caused by the banks' aggressive growth in unsecured consumer loans and the subsequent deterioration in the quality of the loans, compounded by the authorities' inept handling of the unfolding debacle," Jonathan Lee (李信佳), senior director in Fitch's financial institutions group, said in a statement released yesterday.
The annualized charge-off rates on credit-card and cash-card loans soared to 14 percent and 17 percent respectively in January from around 6 percent in recent years, Lee said.
"Charge-offs" refer to accounts receivables that are unlikely to be collected and will be written off. They are categorized as a company's expenses and reduce net income.
The initial rise in the delinquency rate was due to banks' overly aggressive growth in these high-risk portfolios and inadequacies in credit scoring systems, the statement read. The government's misguided responses to the consumer debt fiasco had further helped worsen credit quality, it said.
The bail-out program offering indebted cardholders reduced interest rates and longer payback periods, as well as proposals to lower the interest-rate ceiling and introduce a new personal bankruptcy law, have led some debtors to withhold payments in the hope of more generous debt relief in the future, the statement said.
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