The Financial Supervisory Commission (FSC) on Tuesday asked banks to examine their mortgage practices, as it had found that dummy accounts had been used to inflate real-estate prices in metropolitan Taipei.
It found that about 20 investors offered money management courses in which they encouraged consumers to apply for mortgages with banks, saying that they would help them invest in property free of charge, Financial Examination Bureau Deputy Director General Chang Tzy-ming (張子敏) told a news conference.
The investors helped them pay the mortgages, assigning scriveners to withdraw cash from banks to pay the debt, Chang said.
The scheme to inflate prices also included forging contracts, Chang said.
Two local banks were involved, with their staff participating in the investment courses, Chang said, urging the government to ban such practices.
The banks failed to appraise the properties appropriately and did not notice that market values stated in the contracts were too high, the commission said, adding that the lenders did not consult the government’s actual-price registration system.
They also did not notice that dummy accounts were used, it said.
Meanwhile, the banks provided working funds to the mortgage takers, indirectly contravening the loan-to-value limits on mortgages set by the central bank, the commission said, adding that this increased the risk of the loans.
The commission on Thursday held a virtual meeting with general managers of all local banks, credit unions and bill finance companies, asking them to examine their practices and reminding them that their mortgage operations would be examined later this year.
As the central bank earlier this month asked construction companies to develop their projects within 18 months of taking loans, the commission asked the banks to penalize those who breach the rules, Chang said.
“Banks must not help borrowers hoard land,” Chang said.
The Banking Bureau is considering whether to raise the risk weighting of mortgages in the calculation of capital adequacy at banks and reduce a bank’s capital adequacy if it has approved too many loans with high loan-to-value ratios, the commission said.
The new method of calculation might take effect as soon as June, it said.
The commission was the second government agency to hold talks with banks about the mortgage issue, following the central bank last week.
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