FSC to Dampen Mortgages for Non-Own Use Realties

Taipei, March 7, 2011 (CENS)--In yet another onset against realty speculation, the Financial Supervisory Commission (FSC) plans to require banks to raise capital charge for extending loans for non-own use realties, a move which will prompt banks to tighten their realty loans, especially for realty speculators.

The plan coincides with the “luxury tax” on short-term trading in non-own use realty, proposed by the Ministry of Finance (MOF), underscoring the government's determination to dampen unbridled realty prices.

Statistics of the Central Bank of China (CBC) show that as of the end of January, the outstanding amount of mortgages extended by domestic banks accounted for 32% of total loans, a record high, which manifests their over-emphasis on realty loans in their operation.

In a report prepared for a briefing at the financial committee of the Legislative Yuan today (March 7), Chen Yuh-chang, chairman of FSC, pledges to monitor banks with higher share of mortgages in their loan extension, saying that such loans will be included in the calculation of capital adequacy ratio and operating risk.

The FSC plan calls for dividing the purposes of mortgages to own and non-own use. For non-own use mortgages, banks will have to raise level of weighted risk to 100% or make capital charge in their books.