Taiwan's financial institutions hit record low NPL ratio of 5.98% in Oct.

Taipei, Dec. 16, 2003 (CENS)--Total outstanding non-performing loans (NPLs) recorded by all the financial institutions in Taiwan stood at NT$940.1 billion (US$27.65 billion at US$1 = NT$34) at the end of October, with the overall NPL ratio declining to 5.98%, the lowest since September 2000.

The statistics recently released by the Ministry of Finance (MOF) showed that of the total NPLs recorded as of the end of October, domestic banks accounted for NT$755.7 billion (US$22.23 billion) or 80.4%, with an average NPL ratio of 5.33%. If including domestic investment & trust companies, the amount of NPLs should rise to NT$796 billion (US$23.4 billion), with the NPL edging up to 5.57%.

The NPLs recorded by local-level financial institutions, excluding banks and investment & trust firms, were NT$136.5 billion (US$4.02 billion), translating to a NPL ratio of up to 14.37%. And the NPLs registered by foreign banks here posted at NT$7.6 billion (US$223.53 million) for a NPL ratio of 1.59%, the lowest among all the financial institutions on the island.

To force domestic financial institutions to lower their NPL ratios, the MOF has stipulated that domestic banks with NPL ratio lower than 5% are eligible for various incentives; however, those with a ratio above 5% should be subjective to different punishments depending on their individual situations. MOF officials disclosed that one of the punishments is that banks with NPL ratio higher than 5% will be banned from applying for operating new financial services

With the implementation of the new rules, many domestic banks have tried hard to write off bad loans over the past few months, and it is believed that the average NPL ratio of domestic banks may drop to below 5% by the end of the year.