Chinatrust, foreign bank eye troubled loan market


Wed, Jan 10, 2001 - Page 1

Chinatrust Commercial Bank (中信銀) and Goldman Sachs Group plan to invest NT$10 billion in buying troubled loans from the nation's ailing banks.

The pair signed an agreement yesterday to form an asset management company, which will purchase bad loans and their underlying collateral, turning them around for a profit.

Asset management companies are a part of the government's efforts to clean up the nation's troubled banking sector, which is estimated to have more than NT$1 trillion in non-performing and distressed loans.

According to Wang Yao-shing (王耀興), director of the Bureau of Monetary Affairs, Goldman Sachs will contribute NT$7 billion to the partnership, while Chinatrust will kick in NT$3 billion.

The union between Chinatrust and Goldman Sachs is expected to be the first asset management company set up in Taiwan. Wang said operations are expected to start within this quarter.

According to the official, a second asset management company backed with NT$15 billion from the Bankers' Association, a consortium of banks, will also be founded soon. According to government calculations, roughly 8 percent of the nation's loans are bad -- but analysts say the true figure could be twice that.

Taiwan is looking for outside help to clean up a banking industry that's seeing increasing bad loan levels, as it prepares to combine its more than 50 banks and more than 300 other lenders into fewer and stronger groups.

The asset management company is "a good step," said Anthony Lok, head of regional banking analysis at Nomura International Ltd in Hong Kong. "But Taiwan banks still have a long way to go towards restructuring."

The Ministry of Finance has been pushing hard for financial reforms to clear up the non-performing loan problem and strengthen banks' competitiveness. The ministry has also been encouraging or, in some cases, instructing financial institutions to merge.