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Europeans slam FSC's bad loan disclosure rule

"Our staff and accountants have been working hard over the past two weeks and we should be able to make the disclosure on time as demanded."

Chou Wu-shiung, spokesman for the Bank of Taiwan

The European Chamber of Commerce Taipei (ECCT) yesterday slammed the nation's financial regulator for requiring that banks disclose bad loan accounts, saying that it would negatively impact on corporate governance at the multinational banks.

The Financial Supervisory Commission (FSC) announced on March 1 that all banks were required to disclose details of customers who have defaulted on loans exceeding NT$100 million (US$3 million) on their Web sites today.

"The regulator did not consult with the industry beforehand and made the decision unilaterally," Lawrance Liang (梁敬思) -- one of the ECCT's board directors who also chairs ING Bank N.V.'s Taipei branch -- told the Taipei Times during the chamber's lunch yesterday.

The order to publicly identify bad debtors within the prescribed time would have negative effects on corporate governance and confidentiality practice of international banks, Liang said.

The disclosure may also lead debtors to think that banks have written off those loans and to decide not to pay them off, Liang said.

The banking committees of the ECCT and the American Chamber of Commerce in Taipei (AmCham) were scheduled to hold a joint meeting today to discuss the mandatory disclosure, as well as some regulations governing foreign banks that violate the nation's WTO commitments.

The two issues will be included in the chamber's annual position paper, slated to be released in May, with advice on government policies and the nation's business environment, the ECCT said.

The chamber will also brief an EU delegation that is scheduled to visit Taiwan soon about the regulations governing foreign businesses, Liang said.

The FSC's disclosure initiative was triggered by the discovery that management of Rebar Asia Pacific Group (力霸亞太集團) had embezzled a whopping NT$73 billion from affiliates including The Chinese Bank (中華銀行).

The discovery led to a government takeover of the lender in January.

The government has since taken measures in order to crack down on bad debtors to win back public confidence.

"The entire decision-making process was too careless and brutal and was just meant to serve political interests," said an executive of a foreign bank in Taiwan, who asked to remain anonymous.

The short notice given to banks did not allow for enough time for certified accountants to verify the data on major debtors before the deadline, the executive said.

In response, the FSC said foreign banks should comply with regulations in their host country.

Overseas branches and business units of Taiwanese banks always comply with the regulations where they operate.

By the same principle, international banks doing business here should follow Taiwanese rules, said Lin Tung-liang (林棟樑), the secretary-general of the commission's Banking Bureau.

The disclosure will continue as planned, Lin said by telephone yesterday.

Local banks' overseas branches and business units are exempted from the requirement, because they must comply with confidentiality rules abroad, the official added.

Meanwhile, local banks said they had been working around the clock to prepare data in time for the deadline.

"Our staff and accountants have been working hard over the past two weeks and we should be able to make the disclosure on time as demanded," said Chou Wu-shiung (周武雄), spokesman for the Bank of Taiwan (台灣銀行), the nation's biggest lender by assets.

The Bank of Taiwan estimated that it had between 80 and 90 bad loan accounts to disclose.
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