The Financial Supervisory Commission (FSC) is to conduct a second round of inspections by the end of the year to ensure that financial institutions are complying with the central bank’s latest selective credit controls, Chairman Thomas Huang (黃天牧) said yesterday.
The commission would examine 10 banks, seven credit unions and three billing finance companies, focusing on their construction loan, regular mortgage and luxury real-estate mortgage practices, Huang said.
The second round would be more comprehensive than the first round last year, which inspected 13 companies, as members of the public have become especially concerned about improper mortgage approvals and an overheating property market, he said.
Photo: Liao Cheng-hui, Taipei Times
The commission would target banks with a substantial increase in mortgages in the past few years — but not those targeted in the first round — and credit unions with a rise in construction loans, Huang said.
The first round found 10 banks that did not raise interest rates for contactors and land developers that extended their loan schedules, Huang said.
The banks also failed to require borrowers to develop vacant land as planned, leading to hoarding, he said.
For example, three of the 10 banks failed to control for risk on new loans to developers who used unsold homes as collateral, while six banks were lax with borrowers who used idle industrial land as collateral.
The inspections would focus on banks’ business relationships with contractors and land developers, so it would not affect the approval of mortgages for regular consumers, the commission said.
From the end of last year to October, the amount of money loaned by banks to contractors and land developers increased 10.25 percent to NT$3.77 trillion (US$135.67 billion), commission data showed.
The central bank last week tightened its selective credit controls, lowering the loan-to-value (LTV) cap on mortgages for a third home or luxury housing to 40 percent, 50 percent for land loans and 40 percent for unsold new housing, and limiting the LTV ratio on mortgages for idle land in industrial zones to 40 percent.
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