Though measures are needed to strengthen the nation's banking sector, Taiwan will not face a Japanese-style financial crisis, government officials and pundits said yesterday.
"After implementing financial reforms and passing six finance-related bills, Taiwan will never experience a financial crisis," PFP Legislator Christine Liu (劉憶如) said yesterday.
Liu made the comment as a rebuttal of a report delivered by Heather Montgomery, a researcher with Asian Development Bank Institute, who concluded that Taiwan will soon be facing a banking crisis similar in type and scale to that of Japan in 1997.
Montgomery's report has created a debate in the nation's financial circles.
Liu argued that financial data cited in Montgomery's study is outdated and 15 financial indicators that Montgomery used in her research model have greatly improved in the past two years.
"Unlike other Asian countries, Taiwan doesn't owe any foreign debt and capital is still abundant in the private sector," Liu added.
She also gave her approval to the Ministry of Finance's use of Financial Restructuring Fund (
Sharing a similar view, Jonathan Anderson, executive director of Goldman Sachs LLC's Asia-Pacific Investment Research also said that "the banking system is in trouble [in Taiwan], but a banking crisis is not in the making."
"Good private banks with good management will be able to resolve [problems] on their own, while the state-controlled banks will, on the whole, need to wait for a government restructuring and recapitalization [initiative] to return to full health," Anderson told the Taipei Times.
Anderson said the nation's ratio of non-performing loans (NPLs) is much higher than the official figure of 12 percent.
"Adopting a bottom-up approach by using cash flow data of listed companies, we end up with a potential NPL ratio of 17.5 percent," he said.
Although the major banks have both a declining return on assets and return of equity, Anderson concluded that the nation's high reserves, strong current account surpluses and banks' low foreign currency exposure left no room for a foreign exchange crisis.
In addition, the nation's high state ownership, an implicit policy of no bank failures and high savings flows into domestic assets meant that runs on the banking system were limited to a few isolated cases of gross mismanagement, Anderson added.
Finance Minister Lee Yung-san (
Actually, the Cabinet has decided to enact the "Prompt Corrective Action" -- a warning system that allows the finance ministry to deal with banks, whose capital adequacy ratio falls below 2 or 3 percent when the bank's assets still have positive net worth, according to Hsu Chen-ming (許振明), an economist at the National Taiwan University.
Chen Po-chih (
But he did point out that a decline of lending by banks will have a long-term impact on the economy.
CHIP WAR: Tariffs on Taiwanese chips would prompt companies to move their factories, but not necessarily to the US, unleashing a ‘global cross-sector tariff war’ US President Donald Trump would “shoot himself in the foot” if he follows through on his recent pledge to impose higher tariffs on Taiwanese and other foreign semiconductors entering the US, analysts said. Trump’s plans to raise tariffs on chips manufactured in Taiwan to as high as 100 percent would backfire, macroeconomist Henry Wu (吳嘉隆) said. He would “shoot himself in the foot,” Wu said on Saturday, as such economic measures would lead Taiwanese chip suppliers to pass on additional costs to their US clients and consumers, and ultimately cause another wave of inflation. Trump has claimed that Taiwan took up to
A start-up in Mexico is trying to help get a handle on one coastal city’s plastic waste problem by converting it into gasoline, diesel and other fuels. With less than 10 percent of the world’s plastics being recycled, Petgas’ idea is that rather than letting discarded plastic become waste, it can become productive again as fuel. Petgas developed a machine in the port city of Boca del Rio that uses pyrolysis, a thermodynamic process that heats plastics in the absence of oxygen, breaking it down to produce gasoline, diesel, kerosene, paraffin and coke. Petgas chief technology officer Carlos Parraguirre Diaz said that in
SUPPORT: The government said it would help firms deal with supply disruptions, after Trump signed orders imposing tariffs of 25 percent on imports from Canada and Mexico The government pledged to help companies with operations in Mexico, such as iPhone assembler Hon Hai Precision Industry Co (鴻海精密), also known as Foxconn Technology Group (富士康科技集團), shift production lines and investment if needed to deal with higher US tariffs. The Ministry of Economic Affairs yesterday announced measures to help local firms cope with the US tariff increases on Canada, Mexico, China and other potential areas. The ministry said that it would establish an investment and trade service center in the US to help Taiwanese firms assess the investment environment in different US states, plan supply chain relocation strategies and
Japan intends to closely monitor the impact on its currency of US President Donald Trump’s new tariffs and is worried about the international fallout from the trade imposts, Japanese Minister of Finance Katsunobu Kato said. “We need to carefully see how the exchange rate and other factors will be affected and what form US monetary policy will take in the future,” Kato said yesterday in an interview with Fuji Television. Japan is very concerned about how the tariffs might impact the global economy, he added. Kato spoke as nations and firms brace for potential repercussions after Trump unleashed the first salvo of