Minister of Finance Lee Yung-san (李庸三) let loose some tough words yesterday for bankers that fail to work with the government on implementing financial reforms.
Addressing the subject for the first time since he took office four months ago, the former banker vowed to crack down on poor lending practices in the ailing domestic bank sector.
"Bank officials that are suspect of neglecting their duties by giving loans to problematic lenders will be immediately forbidden to leave the country," Lee said yesterday at a press conference.
"Their personal bank accounts will be frozen while legal action is being taken against them," he said.
Along with threatening to send negligent bank officials to the jail, Lee said that "a tougher risk-control mechanism will soon be placed on banks' financial portfolios."
Without spelling out the final details of the plan, Lee said that the ministry may earmark a BIS ratio of 6 percent as an indicator to bank performances.
"When a bank's BIS ratio reaches 6 percent, certain ttypes of transactions may be restricted," Lee said.
Stricter penalties and precautions will be taken against banks whose BIS ratios drop below 4 percent.
Based on local calculations for non-performing loans (NPLs), which vary from internationally recognized accounting practices, Lee was asked to comment on whether the nation's current 8.78 percent of NPL ratio reflects reality, since hidden bad loans could boost that figure up to 18 percent, as foreign media have reported.
Downplaying the standard's discrepancy, Lee said that "now is not the right time to adjust the nation's NPL standard to meet the internationally accepted norm."
If lending practices become too rigid, the government fears that some enterprises will not be able to secure the necessary capital to continue their operations, adding woe to misery during the current economic downturn.
The central bank has publicized loans that are under observation in an effort to make banking operations more transparent, he said.
Recent efforts to write off bad loans have so far been satisfactory, Lee said.
As some China-bound investments, using loans from Taiwanese banks, trigger difficulties for banks to track down to the actual use of money, Lee also offered an answer yesterday.
In an effort to prevent more bad loans in the future, banks should keep an eye on borrowers' investment plans and financial portfolios, which are made public after being submitted to the Securities & Futures Commission (證期會), Lee said.
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