The Bankers Association of the ROC (
"Our Thursday meeting concluded that the association will allow member banks to make their own decisions over whether they will extend loan rollovers -- due to be repaid in December -- until next year and for how long," the association's secretary-general Kuo Yuh-chyi (郭玉麒) said yesterday.
The association also turned down another proposal from business groups to extend for two years corporate bonds, issued and guaranteed by banks and due in December.
Kuo added that the association has agreed to allow debtor meetings to continue for another year, which are held between banks and borrowers to negotiate new terms for syndicated loans.
The banking sector began the practice of rolling over corporate loans in 1998 at the request of the KMT administration when several mega-corporations were in danger of collapse.
After the DPP government came to power, it continued the practice and the nation's ratio of non-performing loans (NPLs) continued to rise with it.
As of September, Taiwan's NPLs were estimated at NT$1.43 trillion.
Local banker Chang Yi-hsiung (
"For most syndicated loans, banks are willing to roll over loans [for another year] as long as interest and principle are paid on schedule and their business operations are still functioning well," Chang said.
Despite their proposals being vetoed, business leaders yesterday were confident that banks won't turn their backs on corporations that have already suffered from the economic downturn.
"If banks foreclose on corporate loans, they are likely to end up increasing their impaired assets, which is disadvantageous to banks," said Chen Cheng-yi (陳正毅), spokesman for the General Chamber of Commerce (全國商總).
George Lin (
But a pundit yesterday said that the current bank-business relationship implies that the outlook for both sectors looks rough next year.
Hsu Chen-min (許振明), a professor of economics at National Taiwan University, yesterday said businesses that request an additional one-year loan extension probably haven't been able to resolve financial difficulties from the past.
Banks shy away from further lending to deadbeat corporations, he said
"It's a vicious cycle -- with banks strict on lending, the economy won't revive due to less capital investment," Hsu said.
Although banks may choose to extend loans to postpone reporting higher NPLs, Hsu expressed concern that Taiwan's NPL ratio may continue to rise given the poor economic situation.
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