Create credit guarantee fund instead of lowering interest rate cap: analyst

By Jerry Lin AND Joyce Huang  /  STAFF REPORTERS

Fri, Mar 27, 2009 - Page 12

The government should consider providing a credit guarantee for high-risk borrowers to prompt local banks to lower their lending rates, Citibank Taiwan chief economist Cheng Cheng-mount (鄭貞茂) said yesterday.

Cheng made the suggestion at a forum on the potential impact of a proposal by legislators and the Cabinet to lower the limit for interest rates on revolving credit.

The government proposed a credit guarantee fund of nearly NT$1 trillion for large and small enterprises and should do the same for consumer credit loans, Cheng said, suggesting a fund of between NT$100 billion and NT$200 billion.

This could be better for both consumers and banks, he said.

Victor Kuan (管國霖), country business manager of consumer banking at Citibank Taiwan, also opposed an interest rate cap, which he said did not exist in any advanced country.

The Bankers Association (銀行公會), meanwhile, urged the Financial Supervisory Commission to coordinate with the legislature to scrap the proposal.

The association passed a resolution saying that the revision to the Civil Code would affect all of the nation’s lenders.