To bring the country in line with international accounting standards, the government plans to cancel a preferential measure that allowed banks to set aside bad-loan loss provisions for five years after the loans are written off.
Gary Tseng (
Tseng urged banks to take advantage of the preferential measure before in July next year by hastening the write-off of bad loans.
To accelerate the nation's financial reforms, the finance ministry had enacted a number of stimulus measures, including tax deductions and the five-year loan-loss provision measure, stipulated in the merger law, to encourage banks to write off their bad loans as quickly as possible.
According to the bureau, local banks wrote off a total of NT$1 trillion in bad loans last year, including NT$400 billion-worth of bad loans sold to asset management companies.
Since the measure has been widely cited by domestic banks as a major incentive to write off bad loans, the government's plan to end the provision is likely to reduce the banks' willingness to handle non-performing loans aggressively.
Asset management companies may also lose interest in competing for bad loans from local banks.
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