The Financial Supervisory Commission (FSC) plans to raise provision requirements for real-estate-linked lending as domestic lenders earn hefty profits, but downside risks for the property market are deepening.
The commission is studying the regulatory change that may be finalized by the end of next month, FSC Chairman William Tseng (曾銘宗) said on Thursday while taking questions from lawmakers regarding mortgage operations.
Loans relating to home purchases, renovations and construction totaled NT$7.82 trillion (US$25.89 billion), accounting for 31 percent of the sector’s outstanding loans, according to the commission.
Home deals dropped 19 percent year-on-year below the 250,000 mark to 244,300 for the first eight months, almost as bearish as in 2003 amid the SARS epidemic, the latest government data showed.
The government is contemplating more unfavorable measures ahead of the nine-in-one elections in November and the presidential elections in early 2016. Assorted polls cite steep property price hikes as voters’ biggest concern.
The commission may consider lifting provisions for property loans to 1 percent or impose requirements on banks with heavy mortgage operations, the commission said.
Currently, banks have to set aside provisions equivalent to 1 percent of their Tier 1 capital, though risk factors for mortgage operations are higher than other lending.
If realized, the new requirement would translate into extra provisions valued at NT$30 billion to NT$60 billion for the banking sector, analysts say.
The nation’s financial institutions may achieve earnings of more than NT$300 billion this year with net profits approaching NT$230 billion as of last month, Tseng said, suggesting plans to “tighten” should not cause an unbearable burden.
The non-performing loan ratio dropped to 0.28 percent in July this year, as lenders have adopted a cautious and conservative business approach.
The commission is set to allow banks time to meet higher capital thresholds, which might pose a greater burden on smaller-sized lenders, Tseng said.
However, banks with over-concentration of mortgage operations may have to post provisions higher than 1 percent, the commission said.
The planned provision requirement will be the third policy the commission has advised this year to discourage property lending, despite the nation’s improving economic outlook.
POOR INTERNAL CONTROLS: Insurance Bureau Director-General Shih Chiung-hwa said the company is expected to get back on track while its chairman is suspended The Financial Supervisory Commission (FSC) yesterday fined Shin Kong Life Insurance Co (新光人壽) NT$27.6 million (US$939,415) for a reckless investment that endangered its solvency, and suspended its chairman Eugene Wu (吳東進) for poor supervision. The penalty is the second-highest in a single case after Nan Shan Life Insurance Co (南山人壽) was fined NT$30 million in September last year and its chairman Du Ying-tzyong (杜英宗) suspended for two years, the commission said. In three rounds of special and regular examinations conducted since last year, the commission found that Shin Kong Life had given too much power to an asset and liability management committee
HEAVY INVESTMENT: Moody’s affirmed the firm’s ‘Aa3’ rating with a ‘stable’ outlook due to its leading position in the industry and ability to match customer requirements Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) revenue this year is expected to increase about 21 percent to NT$1.29 trillion (US$44.01 billion) from NT$1.07 trillion last year, driven by strong demand for advanced 5-nanometer and 7-nanometer chips mainly used in smartphones and high-performance computing devices, a Moody’s Investors Service report on Wednesday said. TSMC’s rate of revenue growth next year is to increase to 7.5 percent, the ratings agency said. The company, which supplies 5-nanometer chips for Apple Inc’s new iPad series, has introduced the advanced chips ahead of its competitors and gained a significant share of the market for the foundry industry’s
Sony Corp has cut its estimated Play Station 5 (PS5) production for this fiscal year by 4 million units, down to about 11 million, following production issues with its custom-designed system-on-chip (SOC) for the new console, people familiar with the matter said. The Tokyo-based electronics giant in July boosted orders with suppliers in anticipation of heightened demand for gaming in the holiday season and beyond, as people spend more time at home due to the COVID-19 pandemic. However, the company has come up against manufacturing issues, such as production yields as low as 50 percent for its SOC, which have cut into
O2O BICYCLE SHOW: The Taiwan Bicycle Show next year is to be online to offline, with forums, audio-visual conferences and livestreaming of the offline events Local bicycle makers expect demand to continue outpacing supply due to orders triggered by the COVID-19 pandemic, with some companies seeing orders back up through next year. “Next year is all full in terms of orders. Our lead time on components is one year,” Giant Manufacturing Co Ltd (巨大機械) chairwoman Bonnie Tu (杜綉珍) told a news conference in Taipei organized by the Taiwan External Trade Development Council (TAITRA) to announce next year’s Taipei Cycle Show. The pandemic has reduced bicycle supplies and increased demand around the world, Robert Wu (吳盈進), chairman of KMC (Kuei Meng) International Inc (桂盟國際), one of the world’s