State-owned Bank of Taiwan (BOT, 臺灣銀行) on Wednesday sought to ease concern that its credit quality is deteriorating after a sharp increase in provisions over the past 14 months.
Provisions swelled from NT$1.6 billion (US$51.8 million) in 2017 to NT$7.3 billion last year and the nation’s largest lender set aside another NT$3 billion in the first two months of this year, independent director Chen Jin-ji (陳錦稷) said on Facebook.
Chen said he wondered if the spikes suggested credit losses ahead after BOT participated in troubled syndicated loans involving Ching Fu Shipbuilding Co (慶富造船), panel maker Chunghwa Picture Tubes Ltd (中華映管) and Green Energy Technology Inc (綠能科技).
BOT defended the provision hikes, saying in a statement that they were to bolster asset quality, which has improved for the past two years.
The bad-loan ratio dropped from 0.29 percent in 2017 to 0.21 percent last year, while its coverage ratio rose from 497 percent to 715 percent, the statement said.
Chunghwa Picture Tubes and its parent, Tatung Group (大同集團), clients of more than 32 and 48 years respectively, have been hit hard by global economic uncertainty, the statement said.
The lender has taken steps to protect its credit with Chunghwa Picture Tubes, which had debts totaling NT$22.8 billion in 2010, but fell to NT$7.5 billion last year following payments and refinancing, the bank said in an earlier statement.
Creditor banks have secured 100 percent collateral for loans to Chunghwa Picture Tubes and 80 percent for loans to Tatung, it said.
In addition, BOT has sought legal recourse to help review Chunghwa Picture Tubes’ request for financial restructuring, it said, adding that creditor banks would recommend an independent, professional team to lead the reorganization if the courts approve it.
Chen also said he raised questions at board meetings over loose internal controls at affiliated Bank of Taiwan Securities Co (BTS, 臺銀證券).
Employees at the state-owned brokerage were found to have made investments by following government funds, contravening rules against the practice, he said.
BTS said it has punished or removed employees according to the seriousness of their alleged misconduct and asked securities authorities to help probe irregular transactions.
It has also taken steps to beef up internal oversight to avoid such breaches, it said.
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