FSC slams methodology used in WEF report

The World Economic Forum (WEF) came under fire from the Financial Supervisory Commission (FSC) yesterday, which attacked the methodology surveying the banking sector in its latest report as simplistic.

According to the Geneva-based forum's Global Competitiveness Report 2006-2007, Taiwan ranked 100 out of 125 countries in "Soundness of Banks," one of the 89 indicators used to assess a country's overall competitiveness.

Taiwan's overall ranking in the report dropped from No. 8 last year to No. 13 this year.

The "Soundness of Banks" category was used for the first time this year and there was just one question in the category, the commission said.

Respondents were asked to rank their answer on a scale from one to seven, the commission said.

Taiwan was given an overall rating of 4.8 on the question, compared with 24th-ranked Malta's 6.4 and 35th place Burkina Faso's 6.1.

"The question was way too subjective, asking respondents for their views about bank balance sheets without giving any quantitative indicators," Banking Bureau Director-General Gary Tseng (曾國烈) told a press conference yesterday.

"It cannot reflect the real soundness of banks without common indicators such as the capital adequacy ratio, the non-performing loan [NPL] ratio, return-on-asset and return-on-equity," he said.

Earlier yesterday, commission Chairman Shih Jun-ji (施俊吉) attributed Taiwan's "Soundness of Banks" showing to the lack of a globally ranked local bank.

"We have more than 6,000 banks in this country. We have more banks than 7-Elevens. But we do not have a well-organized bank capable of competing globally," Shih said.

In related news, Council for Economic Planning and Development Chairman Hu Sheng-cheng (胡勝正) said yesterday that one reason for the nation's slide in rankings this year might be that the survey was conducted from the end of last year to March, when credit-card debt problems and a debate on cross-strait trade could have inspired more negative responses among respondents.

Since the credit-card abuse problem was gradually being resolved, Hu said he was quite confident that there would be plenty of room for Taiwan to grow.

Meanwhile, Ministry of Foreign Affairs spokesman Michel Lu (呂慶龍) said yesterday that the ministry would be getting in touch with the WEF to find out why it changed Taiwan's name in its annual report from "Taiwan" to "Taiwan, China."

Lu said the ministry did not know if the change was due to administrative "negligence" or pressure from China, but it would respond "appropriately" after it established out the reason for the change.