Financial Supervisory Commission (FSC) Chairman Wellington Koo (顧立雄) yesterday said that while the commission has detected signs pointing to potential financial risk in China, it has tightened its regulations to limit local lenders’ exposure.
Taiwan Research Institute (台灣綜合研究院) founder Liu Tai-ying (劉泰英) on Tuesday said that Taiwan would next year be threatened by contagion risk from a financial crisis originating in China, which could drag the TAIEX to as low as 6,000 points.
“Although the potential financial crisis in China is concerning, given that Beijing has implemented several new measures to stabilize the market, we do not see any storm ahead,” Koo told the Taipei Times on the sidelines of a meeting of the Legislative Yuan’s Finance Committee.
However, the commission has asked any lender whose exposure to China exceeded 80 percent of its net worth to pay more attention to their credit extensions, Koo said.
The commission has tightened regulations requiring lenders to prepare an allowance for bad debts equal to at least 1.5 percent of their loans offered in the Chinese market, greater than the 1 percent in regular cases, he said.
As for the institute’s forecast that the weighted index would fall to less than 6,000 points, Koo said that the local equity market is easily affected by its regional peers, but the US equity market would be affected more by a US-China trade dispute.
In related news, Minister of Finance Su Jain-rong (蘇建榮) said at the meeting that Tatung Co (大同) should take on more responsibility for financially troubled subsidiary Chunghwa Picture Tubes Co (CPT, 中華映管).
Seven state-owned banks have loaned CPT a total of NT$6.8 billion (US$220.69 million), as well as NT$934 million to Tatung’s solar wafer subsidiary, Green Energy Technology Inc (綠能科技), Su said, adding that he has asked the banks to conduct a risk assessment on their loans.
LCD panel maker CPT, which on Friday last week submitted a restructuring plan to the Taoyuan District Court due to its inability to pay its debts, on Monday offered a payment plan during negotiations with creditors, but was unable to secure their agreement.
Tatung had borrowed NT$113.2 billion as of the end of September, with short-term loans totaling NT$46.5 billion, short-term notes and bills payable reaching NT$1.2 billion, long-term loans due within one year tallied at NT$17.7 billion and other long-term loans totaling NT$47.8 billion, commission data showed.
Among Tatung’s subsidiaries, CPT had borrowed the most, with long-term loans totaling NT$33.1 billion, the data showed.
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