Taiwan’s financial regulator asked 35 domestic banks to conduct stress tests for credit risks after the central bank tightened rules for mortgage loans to curb real-estate speculation.
The tests will focus mainly on corporate and commercial lending and banks must submit the results by Sept. 15, Shiau Chang-ruey (蕭長瑞), chief secretary of the Financial Supervisory Commission, said in a telephone interview yesterday.
The tests include worst-case scenarios for the economy, unemployment and property prices, and assess whether banks can meet a Tier 1 capital ratio of 4 percent under these circumstances, Shiau said.
Central bank Governor Perng Fai-nan (彭淮南) earlier this month asked financial institutions to curb real estate speculation by tightening lending processes.
The monetary authority is seeking to rein in property speculation as credit expands and prices rise, spurred by low interest rates. The central bank raised its benchmark rate to 1.375 percent on June 24.
Consumer loans in Taiwan, including housing purchases and renovations, climbed for 22 months through May, when they rose 4.5 percent from a year earlier to NT$6.85 trillion (US$214 billion), according to data from the central bank. Total bank loans as of the end of May reached NT$19.3 trillion, an increase of 4.9 percent from a year earlier.
The Committee of European Banking last week said seven out of 91 banks in the EU failed a stress test to determine if they could withstand a recession and sovereign debt crisis.
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