The Financial Supervisory Commission (FSC) yesterday approved measures to tighten risk control and asset management requirements governing land purchases by insurance firms in a bid to curb land hoarding.
The measures, to take effect in the next few days, marked the latest of a series of government moves to rein in property speculation that has made housing prices unaffordable, especially in Taipei City and New Taipei City (新北市).
“It is time the commission raise management and profitability requirements regarding real estate investment by insurance companies to reflect changes in the macro-environment over the last two years,” the commission said.
Under the new measures, turning idle plots of land into parking lots or erecting advertisement billboards on them will not meet the principle of “prompt and profitable utilization” adopted in March 2009 to govern land purchases by insurance firms, the commission said.
All real estate investments by insurance firms must yield returns equal to two-year interest rates on postal savings deposits plus 50 basis points, the commission said.
The financial regulator also increased risk factors on real estate investments by 30 percent when vacant land purchases are involved.
The risk gauge will go up an extra 30 percent each time insurance firms fail to begin land development as scheduled, the commission said, adding that the companies must obtain approval for delayed construction. The restriction will affect insurance firms’ calculation of risk-based capital ratio.
The commission will also require insurance firms to file reports within a designated period of time for existing land plots that fail to meet the new changes.
The new rules come after the Ministry of Finance last month reinstated fines on idle and underused plots of land. Many have pinned the blame of rising home prices on land hoarding by financial firms amid high liquidity and low capital costs.