The Financial Supervisory Commission (FSC) yesterday said that it would lift restrictions on mortgage loans made by domestic banks, in a move to expand the nation’s mortgage pool by NT$1.32 trillion (US$39.96 billion) and aid the cooling housing market.
The change was made in light of significant improvements in addressing overexposure to home and properties loans, Banking Bureau Director-General Austin Chan (詹庭禎) told a press conference, adding that the number of banks flagged by the commission had decreased to from 17 in 2001 to seven.
“It is evident that banks have stepped up their internal controls on the matter, therefore the commission will leave loan decisions to their discretion,” Chan said.
Chan added that banks would continue to conform to heightened monitoring requirements, such as semi-annual updates to their boards of directors.
He said that as of the end of October, the loan-to-deposit ratio among domestic banks stood at 74 percent, indicating that banks are still flush with idle funds that could be used more productively.
The commission in 2011 placed 10 banks on its watchlist, as they were found to have an excessively high concentration of mortgages and property development and home improvement loans, while flagging other banks whose exposure was deemed less severe.
The 10 banks were required to keep their mortgages at less than 30 percent of their overall loan book. In addition, the banks were also required to keep the sum of mortgages, property development and home improvement loans at less than 40 percent of their loan books.
The restrictions have since been lifted, with small to medium-sized banks poised to benefit the most from the change, including Land Bank of Taiwan (土地銀行), Bank of Panhsin (板信銀行), King’s Town Bank (京城銀行) and Sunny Bank (陽信銀行), Chan said.
In addition, before the end of next year, banks will be required to raise their provisions against mortgage and property development defaults to 1.5 percent of their loan books, up from 1.44 percent at the end of October, Chan said.
As of the end of October, property development loans by domestic banks were tallied at NT$1.85 trillion, or 7.33 percent of total loans, with mortgages and home improvement loans reaching NT$6.2 trillion, representing 24.52 percent of total loans, commission data showed.
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