There is little need for excessive concern over the banking industry's NT$1 trillion in non-performing loans, according to Minister of Finance Paul Chiu (邱正雄).
Scholars raised questions about the health of the banking industry yesterday at a forum sponsored by the Chung-hua Institute for Economic Research (中華經濟研究院), citing a report by the Taiwan Ratings Corp (中華信用評等公司).
They noted that Taiwan has racked up NT$1 trillion in non-performing loans as a result of the Asian financial crisis and last year's earthquake.
But bad debts, Chiu said, account for just 20 percent of the non-performing loans, while banks have allocated more than NT$170 billion in funds for disposing of bad debt.
The government's decision to lower bank revenue taxes will also lower banks' tax burden by another NT$160 billion over four years, allowing them to write off an estimated NT$300 billion in bad debt.
In addition, Chiu said that banks were in a good position to recover many mortgaged assets, further reducing the level of their bad loans.
Taiwan's level of bad debt is higher than the US, but much lower than other Asian nations, Chiu added.
Scholars at the symposium attributed the high level of bad debt to legal loopholes, bad management and a sluggish real estate market.
Chiu conceded that there are loopholes in Taiwan's stock ownership laws, and said the Ministry of Finance would revise laws to prevent the use of dummy accounts and corporate cross-holdings.
Scholars at the symposium also criticized the government's use of the NT$500 billion National Stabilization Fund (
They proposed that the government cease interventions in the stock market and instead focus its attention on stabilizing forex markets.
Chiu defended the use of the fund, but said it would only be used in the event of market instability.
On Friday, after the nation's main stock index fell 7.1 percent for the week, Chiu said in a televised statement that the government was prepared to use the stock buying fund.
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