Wed, Jul 17, 2019 - Page 12 News List

Risk-control improvements aid state-run banks: Fitch

By Crystal Hsu  /  Staff reporter

The nation’s state-run banks have made improvements in their risk controls and financial profiles, leaving them better positioned to navigate an economic slowdown or a turn in the credit cycle, a Fitch Ratings Ltd report said.

These banks are mostly large lenders and collectively make up about 50 percent of system assets, so their credit standards influence wider banking industry practices and their improved financials add stability to the system, Fitch said in the report, which was issued last week.

The government owns significant shares in Mega International Commercial Bank (兆豐銀行), First Commercial Bank (第一銀行), Hua Nan Commercial Bank (華南銀行), Taiwan Cooperative Bank (合庫銀行), Taiwan Business Bank (台灣企銀) and Chang Hwa Commercial Bank (彰化銀行).

It has full control of Bank of Taiwan (臺灣銀行) and Land Bank of Taiwan (土地銀行).

State-run banks, due to their policy roles, have historically been viewed as having weaker credit profiles than their private peers, Fitch said.

However, they have grown increasingly commercialized, as evidenced by the narrowing gaps between their profitability and loan quality, and those of private banks over the past 16 years, the ratings agency said.

“We expect state-run banks to continue to balance the need to help implement government policies with their own strategic objectives of sustaining profitable operations and distributing steady dividends to state coffers,” the report said.

The systemic importance of state-run banks and their policy roles also require continued government support to underpin their stable rating outlook, Fitch said.

The government would retain its controlling stakes and deep involvement in state-run banks’ management and operations to maintain system stability, the report said.

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