Consumer credit card lending in fast-growing Asian economies in recent years has been marked by sharp boom and bust cycles that can jeopardize financial stability, a report by the Bank for International Settlements (BIS) said yesterday.
The use of credit cards in many Asian markets increased three to sixfold between 1998 and 2005, while the average credit card balance per head grew by about the same amount, a study in the BIS' quarterly review said.
Banks took advantage of the growth in consumer markets to compete for high yield but riskier business among less wealthy cardholders, by reducing lending standards and making consumer credit more easily available, it said.
That helped fuel consumer spending but also produced a rapid build-up in household debt, with a "disproportionate concentration of debt burdens among riskier card holders," the report found.
Cardholders later started to default on repayments as their debt accumulated and they became overstretched, prompting the introduction of tighter lending standards that suddenly stifled the private credit market and affected the economy.
"The bottom line is that, as consumer finance becomes an important part of Asia's financial system, policymakers need to better understand the associated risk and be prepared to respond," the BIS report said. "Credit card lending represents new opportunities but increases risks to the financial system."
The BIS, known as the central bank of central bankers, highlighted three examples of boom and bust cycles, in Hong Kong in 2002, in South Korea in 2003 and in Taiwan last year.
The report estimated that one-third of all card lending books were simply written off after the lending booms swung to bust, in order to cushion the shock.
By comparison, credit card lending in Malaysia, Singapore and Thailand has so far shown a more steady pattern of growth, the report said.
Since the Asian financial crisis in 1997, local bank lending has been marked by a shift to consumer finance, with lending to households outpacing the increase in total bank loans to other markets, such as the corporate sector.
That was spurred by weak demand for corporate loans but also by government policies, including an easing of monetary policy to revive the economy and financial deregulation that expanded the number of lenders, the report said.
In the year before South Korea's credit card market was tightened, average per capita card balances reached US$2,006 and credit card lending accounted for 45 percent of household loans or 21.3 percent of all bank loans.
Crucially, household credit card debt equaled 14.7 percent of South Korea's GDP, according to the report.
Nvidia Corp yesterday unveiled its new high-speed interconnect technology, NVLink Fusion, with Taiwanese application-specific IC (ASIC) designers Alchip Technologies Ltd (世芯) and MediaTek Inc (聯發科) among the first to adopt the technology to help build semi-custom artificial intelligence (AI) infrastructure for hyperscalers. Nvidia has opened its technology to outside users, as hyperscalers and cloud service providers are building their own cost-effective AI chips, or accelerators, used in AI servers by leveraging ASIC firms’ designing capabilities to reduce their dependence on Nvidia. Previously, NVLink technology was only available for Nvidia’s own AI platform. “NVLink Fusion opens Nvidia’s AI platform and rich ecosystem for
WARNING: From Jan. 1 last year to the end of last month, 89 Taiwanese have gone missing or been detained in China, the MAC said, urging people to carefully consider travel to China Lax enforcement had made virtually moot regulations banning civil servants from making unauthorized visits to China, the Control Yuan said yesterday. Several agencies allowed personnel to travel to China after they submitted explanations for the trip written using artificial intelligence or provided no reason at all, the Control Yuan said in a statement, following an investigation headed by Control Yuan member Lin Wen-cheng (林文程). The probe identified 318 civil servants who traveled to China without permission in the past 10 years, but the true number could be close to 1,000, the Control Yuan said. The public employees investigated were not engaged in national
ALL TOGETHER: Only by including Taiwan can the WHA fully exemplify its commitment to ‘One World for Health,’ the representative offices of eight nations in Taiwan said The representative offices in Taiwan of eight nations yesterday issued a joint statement reiterating their support for Taiwan’s meaningful engagement with the WHO and for Taipei’s participation as an observer at the World Health Assembly (WHA). The joint statement came as Taiwan has not received an invitation to this year’s WHA, which started yesterday and runs until Tuesday next week. This year’s meeting of the decisionmaking body of the WHO in Geneva, Switzerland, would be the ninth consecutive year Taiwan has been excluded. The eight offices, which reaffirmed their support for Taiwan, are the British Office Taipei, the Australian Office Taipei, the
CAUSE AND EFFECT: China’s policies prompted the US to increase its presence in the Indo-Pacific, and Beijing should consider if this outcome is in its best interests, Lai said China has been escalating its military and political pressure on Taiwan for many years, but should reflect on this strategy and think about what is really in its best interest, President William Lai (賴清德) said. Lai made the remark in a YouTube interview with Mindi World News that was broadcast on Saturday, ahead of the first anniversary of his presidential inauguration tomorrow. The US has clearly stated that China is its biggest challenge and threat, with US President Donald Trump and US Secretary of Defense Pete Hegseth repeatedly saying that the US should increase its forces in the Indo-Pacific region