Members of Taiwan's Bankers Association (銀行公會) planned to pass a proposal yesterday that would extend loan rollovers by one more year to corporations that are operating normally, a Chinese-language newspaper reported yesterday.
The rollovers will apply to those companies that have loans that are due to be repaid before April 14.
The issue was discussed at a breakfast meeting yesterday morning at which Premier Chang Chun-hsiung (張俊雄), Vice Premier Lai In-jaw (賴英照), Minister of Finance Yen Ching-chang (顏慶章) and representatives from the business sector were present.
Whether banks decide to roll over the loans is up to the banks themselves, however, and the government won't involve itself in the issue, Yen said during the meeting.
This is the first time that a finance minister has refused a request by business leaders for a one-year grace period to repay loans, marking a drastic change in the government's stand on the issue of loan rollovers.
"If [the government] requested the banking industry extend such loans for one more year over the next 12 months, it might cause some banks to face a liquidity crunch ahead of the peak demand time of the Lunar New Year holiday, in January or February," Yen said.
Furthermore, Yen said, "This problem concerns each individual bank and whether it is able to extend the loans.
"Since the bank itself is the one who knows the industry best, I think it should be left to the banking industry to determine whether a loan should be extended or not. The government should take a hands-off approach to the issue," Yen said.
After the Asian financial crisis in 1997, the KMT administration in late 1998 requested the banking industry extend loans to local businesses, especially large groups and conglomerates in traditional industries.
The DPP administration continued the practice when it took power last year, but the number of non-performing loans has continued to rise.
The total of non-performing loans for the entire banking sector has been estimated to top NT$1 trillion.
Yen's comments yesterday show that the government has no intention of forcing the banking sector to extend such loans indefinitely.
"The government shouldn't have intervened with banks' loan policies in the first place," said Norman Yin (
But Yin doubts whether the government will be able to resist pressure from large groups and conglomerates in traditional industries.
"Because government intervention has been employed for several years, it is questionable whether the administration would be able to abolish it all at once," Yin said.
"From my observations, the administration may not intervene directly, but instead will assist some groups that have financial difficulties through state-owned banks, in order to prevent serious problems in case of defaults by these groups," Yin said.
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