Thu, Jun 28, 2012 - Page 14 News List

FSC tells 10 banks to cut real-estate sector lending

TIGHTENING:Ten banks that have focused on real-estate loans face loan loss reserve increases, while insurance firms could face tighter capital requirements

By Crystal Hsu and Amy Su  /  Staff reporters

The Financial Supervisory Commission (FSC) asked 10 domestic lenders to lower real estate-related lending by the end of the year or face tighter capital requirements, Jean Chiu (邱淑貞), deputy director-general of the commission’s Banking Bureau, said yesterday.

Meanwhile, the central bank asked all domestic financial institutions to submit reports about details of their luxury housing lending every month.

The 10 lenders include Bank SinoPac (永豐銀行), HSBC Bank (Taiwan), Land Bank of Taiwan (土地銀行), Union Bank of Taiwan (聯邦銀行), Bank of Panhsin (板信銀行), Standard Chartered Bank (Taiwan), Taichung Bank (台中銀行), Sunny Bank (陽信商銀), COTA Commercial Bank (三信商業銀行) and Hwatai Commercial Bank (華泰銀行), Chiu said.

“Those banks all display heavy concentration in real estate-linked loans and are in need of risk enhancement to better protect their asset quality,” Chiu said.

To that end, the lenders may either shrink their real-estate loan book or increase bad loan provisions, Chiu said.

The commission would ask them to raise their loan loss reserve by another 0.5 to 1 percentage points if they fail to show improvement by the end of the year, Chiu said.

The commission applies two sets of criteria on big and small lenders when measuring loan concentration, Chiu said.

For the nation’s 10 largest banks, mortgage loans should be capped at 30 percent of total lending and land financing at 10 percent, Chiu said.

For small and medium-sized lenders, the limits are 40 percent and 15 percent respectively, she added.

Secured loans — using real-estate properties as collateral — should not account for more than 70 percent of the overall portfolio, Chiu said, adding that there is flexibility if loans are intended for non-real estate investments.

Meanwhile, the commission’s Insurance Bureau is considering tightening capital requirements for the purchase of real estate by insurance companies.

Joanne Tseng (曾玉瓊), deputy director-general of the Insurance Bureau, said the bureau reviews the issue each year to reflect changes in the market and will arrive at a conclusion later.

Insurance firms have been the largest buyers of commercial property and undeveloped land in recent years to park idle funds.

A central bank official said yesterday all domestic financial institutions would be required to report details of their luxury housing lending at monthly intervals for the central bank to review.

The move by the commission and the central bank came after the latter on Thursday last week introduced new selective credit controls aimed at luxury homes that have remained unresponsive to measures to induce a price correction.

On Thursday last week, the central bank asked domestic lenders to lower housing loans to 60 percent of a home’s value for properties worth more than NT$80 million (US$2.67 million) in the Greater Taipei area and for luxury homes costing more than NT$50 million in other areas.

The bank then sent the document requesting lenders to submit reports about luxury housing loans at monthly intervals. Domestic financial institutions have to submit their first report by July 10 and hand over subsequent reports by the fifth of each month.

The lenders were also asked to differentiate luxury housing loans in the five special municipalities from those in other regions, an indication the central bank is focusing more on easing the housing market in urban areas.

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