The Financial Supervisory Commission (FSC) yesterday said it was easing minimum capital requirements for the nation’s six “domestic systemically important banks” (D-SIB), allowing them to expand lending by NT$400 billion this year to help companies affected by the COVID-19 outbreak.
The commission was planning to raise the minimum requirements for the common equity ratio, Tier 1 ratio and total capital ratio of the six D-SIBs by 1 percentage point from last year, but yesterday decided to halve the increase to ease the pressure on banks, Banking Bureau Chief Secretary Phil Tong (童政彰) told a news conference in New Taipei City.
“By relaxing the capital requirements, the six D-SIBs are expected to face less capital management pressure and to increase their risk absorption capacities,” Tong said. “We estimate that the six banks could boost their total lending capacity by NT$400 billion more than what they could if we did not ease the capital requirements.”
Photo: Kelson Wang, Taipei Times
The common equity ratio is the ratio of a bank’s common equity to its risk-weighted assets, including corporate loans, mortgages and personal loans, with each type of loan given a different risk weighting. To meet a higher common equity ratio requirement, a bank could either boost its common equity or reduce its loans.
CTBC Bank (中國信託銀行), Cathay United Bank (國泰世華銀行), Taipei Fubon Bank (台北富邦銀行), Mega International Commercial Bank (兆豐銀行) and Taiwan Cooperative Bank (合庫銀行), which were granted D-SIB status in 2019, are now required to meet a minimum common equity ratio of 8 percent, Tier 1 ratio of 9.5 percent and total capital ratio of 11.5 percent, the commission said.
First Commercial Bank (第一銀行), which was awarded D-SIB status last year, is required to meet a minimum common equity ratio of 7.5 percent, Tier 1 ratio of 9 percent and total capital ratio of 11 percent, it said.
All six banks met the adjusted capital requirements in the first quarter, Tong said.
The commission’s decision to relax the capital requirements came after negotiations with the six lenders on Wednesday last week to extend more loans to businesses affected by the outbreak, he said.
As corporate loans have a comparatively higher risk weighting of 100 percent, the six banks can approve more corporate loans with the more relaxed capital requirements, he said.
“If they do not [provide more loans], we will try to communicate with them,” Tong said.
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