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Bankruptcy bill passed by legislature

After long negotiations over amendments, legislators last night passed a bill allowing individuals to file for bankruptcy, which is a balanced way to protect the rights of both debtors and creditor banks, the nation's financial regulator said.

"We believe the impact on the banking sector can be lessened after taking some controversial clauses [out of the law]," Financial Supervisory Commission Vice Chairwoman Susan Chang (張秀蓮) said in an interview last night.

The previous regulations were criticized for favoring borrowers, causing concern about a potential credit crunch because banks would tighten their lending and raise interest rates to reflect rising risk.

The bad debt stemming from credit and cash card lending may amount to some NT$500 billion (US$15 billion), consisting of NT$330 billion worth of restructured loans and NT$163 billion in bank write-offs, data from SinoPac Securities Corp (永豐金控) said.

The law became more acceptable after removing the disputed regulation that would have exempted borrowers from repaying the principle on the home loans for eight to 10 years, Chang said.

SinoPac Securities said previously that the clause would extend the risk of mortgages and result in worse financial difficulties that unsecured lending has caused.

FSC estimated that some 40,000 to 50,000 applicants may file for bankruptcy under the new law.
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