The nation's unprecedented consumer bad loan problem is expected to start easing off in the second half of the year following the speedy efforts of banks to tighten their lending policies and write off bad loans, Fitch Ratings Taiwan said yesterday.
The quality of Taiwan's unsecured consumer lending deteriorated sharply in the second half of last year due to excessive competition, with the charge-off ratio on credit and cash-advance cards doubling from a 6-percent annual rate to a 12 to 15 percent rate by the end of last year.
A charge-off ratio refers to the total amount of bad debt written off during a period as a percentage of the total credit or cash card receivables at the end of that period.
"Card debts peaked in the fourth and first quarters but now the problem has been kept under control," said Jonathan Lee (
The total revolving credit balance for credit cards decreased for the second straight month in January, falling by 0.26 percent to NT$493.4 billion (US$15.17 billion). At the same time, the cash-card lending balance slid for a fourth month, shrinking by 3.12 percent to NT$298.2 billion, according to the Financial Supervisory Commission's latest statistics.
"If there's no `moral hazard' occurring among retail borrowers when the government pushes forth debt restructuring schemes and plans amendments to the bankruptcy law, banks' profitability is expected to return to the normal level next year," he added.
Most banks will still see their profits compressed this year from the consumer loan fallout.
Although many have warned that Taiwan might repeat South Korea's credit card debacle, Lee expressed optimism, citing the small scale of card loans compared with overall lending. Currently, debts incurred from credit and cash cards account for less than 5 percent of the total lending of NT$17 trillion in the financial market.
Even if banks choose to write off the unsecured loans altogether, the overall delinquency ratio would merely top 7 percent by adding the general non-performing loan (NPL) ratio of 2.5 percent -- still much lower than the 12-percent default ratio Taiwan suffered in 2002, he noted.
"Taiwan's situation is, in substance, quite stable and there's little probability of a `storm' taking shape. But the financial regulator and banking operators should strengthen supervision and risk management capability to ensure a healthy environment," he said.
Although the government has presented a card-debt negotiation mechanism to help debtors, many have adopted a wait-and-see attitude, naively thinking that there might be more favorable bailout measures or that a new version of the bankruptcy law will serve as their panacea.
Lee warned that Taiwan must be well prepared to implement the draft consumer debt clean-up bill, which DPP Legislator Jerry Tsai (
Hong Kong amended its bankruptcy law in 1998 and had seen the number of bankruptcy filings surge from dozens to several thousands of cases a day, leaving the judicial authorities incapable of handling the situation.
Lee said that the government must determine whether its judicial system is staffed with a sufficient number of professionals, and map out ways to avoid moral hazard while upholding justice and equity.
Japanese Prime Minister Sanae Takaichi has talked up the benefits of a weaker yen in a campaign speech, adopting a tone at odds with her finance ministry, which has refused to rule out any options to counter excessive foreign exchange volatility. Takaichi later softened her stance, saying she did not have a preference for the yen’s direction. “People say the weak yen is bad right now, but for export industries, it’s a major opportunity,” Takaichi said on Saturday at a rally for Liberal Democratic Party candidate Daishiro Yamagiwa in Kanagawa Prefecture ahead of a snap election on Sunday. “Whether it’s selling food or
CONCERNS: Tech companies investing in AI businesses that purchase their products have raised questions among investors that they are artificially propping up demand Nvidia Corp chief executive officer Jensen Huang (黃仁勳) on Saturday said that the company would be participating in OpenAI’s latest funding round, describing it as potentially “the largest investment we’ve ever made.” “We will invest a great deal of money,” Huang told reporters while visiting Taipei. “I believe in OpenAI. The work that they do is incredible. They’re one of the most consequential companies of our time.” Huang did not say exactly how much Nvidia might contribute, but described the investment as “huge.” “Let Sam announce how much he’s going to raise — it’s for him to decide,” Huang said, referring to OpenAI
CHIP HANG-UP: Surging memorychip prices would deal a blow to smartphone sales this year, potentially hindering one of MediaTek’s biggest sources of revenue MediaTek Inc (聯發科), the world’s biggest smartphone chip designer, yesterday said its new artificial intelligence (AI) chips used in data centers are to account for 20 percent of its total revenue next year, as cloud service providers race to deploy AI infrastructure to meet voracious demand. MediaTek is believed to be developing tensor processing units for Google, which are used in AI applications. While it did not confirm such reports, MediaTek said its new application-specific IC (ASIC) business would be a new growth engine for the company. It again hiked its forecast for the addressable ASIC market to US$70 billion by 2028, compared
Motorists ride past a mural along a street in Varanasi, India, yesterday.
RSS