Though overdue loan figures at major state-run commercial banks climbed to record highs last month, Minister of Finance Yen Ching-chang (
The seven largest state-controlled banks, including Bank of Taiwan (
Still, Yen repeatedly insisted yesterday that there was no financial crisis on the horizon.
"Indeed, there is some problems in our financial system, but it definitely will not trigger financial crisis. A chain-reaction financial crisis will not occur either," Yen said.
"It's not always accurate to use the overdue loan ratio as the exclusive benchmark of a potential risk for financial crisis," the finance minister said.
"Take the Southeast Asian financial crisis as an example. The overdue loan ratio of some countries did not reach 15 percent. It was because their standards for their overdue loan ratio calculation had been too loose. In fact, many loans that had not been included" were bad, he said.
"On the contrary, Taiwan has been one of the most strict countries in the world in calculating the ratio, and there has been no comprehensive liquidity problem in this country," Yen said.
Since last year, Yen has been using a 15 percent overdue loan ration as the tipping point that could lead to a financial crisis.
"By international standards, Taiwan has not reached the 15 percent overdue loan ratio, which could trigger a financial crisis. Therefore, we should not worry that Taiwan is going to have a financial crisis," Yen said.
When some foreign media warned that Taiwan could run the risk of a coming financial crisis late last year, Yen said he had told Premier Chang Chung-hsiung (張俊雄) that "I am not worried about it [the financial crisis] at all."
"Minor problems do exist in the financial system. A percentage of bank assets do have poor quality, but the entire overdue loan ratio is not going to rise significantly. The reason is simple. When the domestic economy is weakening, the overdue loan will not appear at the same time and be reflected in the overdue loan ratio. What happens is that there will be a slow increase [in the ratio]," Yen said.
Yen also discussed the large number of competitors in the financial sector.
"The current problem is that we have too many financial institutions in the market, and their market shares are for the most part too low. The total market share of 300 plus credit cooperatives is less than 1 percent. The market shares of most of the 53 domestic banks is also less than 1 percent. Cut-throat competition and high operating costs have made the structural problems even worse. In order to improve the current situation, the finance ministry has been promoting the structural reform of financial institutions, including promoting the Financial Institutions Law, passed at the end of last year, and submitting another draft of the financial holding company law," Yen said.
"I hope that after the holding company law is passed between April and May, and when the banking industry holds their annual stockholder meetings between May and June, many banks will convert themselves into financial holding companies," Yen said.
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