The Financial Supervisory Commission (FSC) has stepped up inspections of land financing after asking domestic lenders last week to lower real-estate related loans to avoid overconcentration, the director-general of the commission’s financial examination bureau, Jong Huey-jen (鍾慧貞), said yesterday.
The move marked the regulator’s latest bid to strengthen risk control and check land hoarding that is blamed for contributing to the nation’s high housing prices.
“The bureau has launched a special inspection intended to make sure banks comply with loan restrictions for undeveloped land plots,” Jong said by telephone.
The examiners will pay close attention to whether lenders cap loans for undeveloped land at 65 percent of their value and withhold 10 percent of the funding until after development work begins.
The central bank introduced the restrictions in December 2010 to cool the real-estate market after selective credit controls six month earlier proved ineffective.
Jong also said the bureau would ensure price evaluations for land plots were fair and reasonable, and that borrowers did not obtain further loans using the same collateral.
The central bank added the latter requirement on June 21 after luxury home prices in downtown Taipei reached a new high as a result of aggressive advertising campaigns that painted real estate as the best defense against inflation.
The FSC official refused to name the banks to be examined or to say how long the special inspections would last.
“The number of lenders to be inspected is more than 10 and fewer than 15,” she said, voicing concern that revealing further details would weaken the operation.
The examination came one week after the commission’s banking bureau asked 10 lenders to trim real estate-linked loans by the end of this year or face tighter capital requirements.
The lenders are 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).
The banks all have heavy exposure to real-estate-linked loans and are in need of risk enhancement to better protect their asset quality, Jean Chiu (邱淑貞), deputy director-general of the FSC’s banking bureau, said on June 27.
To that end, the lenders can either shrink their real-estate loan books or increase bad loan provisions by between 0.5 and 1 percentage point, Chiu said.