FSC downplays consumer default report

The Financial Supervisory Commission yesterday said that the nation's consumer default problem was not as serious as a McKinsey & Co report had estimated and that negative effects would gradually die down starting in July.

According to the commission's statistics, the banking sector will have to write off nearly NT$200 billion (US$6.17 billion) in bad loans from credit and cash-advance cards, including more than NT$100 billion in charge-offs, commission Chairman Kong Jaw-sheng (龔照勝) said during a question-and-answer session at the legislature's Finance Committee yesterday.

However, the McKinsey & Co report said that Taiwan's reckless lending in credit and cash cards, as well as in small unsecured loans, had built up bad loans of NT$380 billion.

Chinese Nationalist Party (KMT) Legislator Fei Hung-tai (費鴻泰) urged the commission to carefully monitor the problem to avoid a possible financial crisis.

Despite the commission's clarification, major banks have reported large charge-off amounts in the first quarter.

Taishin International Bank (台新銀行), the nation's second-biggest credit-card issuer, last year made an extra provision of NT$19.13 billion to cover possible loan defaults.

Cathay United Bank (國泰世華銀行) wrote off NT$4.6 billion in bad loans in the first quarter, while Ta Chong Bank (大眾銀行) reported NT$5.5 billion in charge-offs.