The Financial Supervisory Commission (FSC) on Thursday raised the risk weighting for five types of mortgages and loans for local banks to as high as 200 percent, a measure aiming to further rein in the domestic housing market.
Risk weighting is used to calculate a bank’s risk-based capital, which banks must put aside as a reserve. The higher the risk weighting, the more risk-based capital is required.
The risk weighting of a mortgage on an individual’s third house has been raised from 30 percent to 100 percent, the commission said.
Photo: Hsu Yi-ping, Taipei Times
The risk weighting of a mortgage for a corporate entity to purchase real estate for investment instead of self-use has also been increased to 100 percent from 30 percent, it said.
The risk weighting for loans to buy plots of land in commercial zones has been lifted to 200 percent from 150 percent, it said.
For plots located in a residential zone, the risk weighting has been raised to 150 percent from 100 percent, it added.
To prevent land hoarding, the commission has raised the risk weighting on loans where borrowers use idle plots of industrial land as collateral to 200 percent, from a range of 75 percent to 150 percent, the commission said.
The new risk weightings apply to new loans as well as previously approved loans that are being extended, Banking Bureau Deputy Director-General Lin Chih-chi (林志吉) said.
All banks must use the new risk weightings to calculate their risk-based capital this quarter and if a bank’s capital adequacy does not meet the regulatory minimum as a consequence, it must reduce its risk-weighted assets or raise new capital, Lin said.
The commission’s preliminary evaluation showed that the average capital adequacy of local banks would fall by 0.47 to 0.58 percentage points as a result of the new risk weightings, he said.
Four banks would face a greater impact, with their capital adequacy declining by more than 1 percentage point, but they would still meet the minimum requirement, he added.
In related news, the commission on Thursday said that three local banks slowed their pace of approving mortgages in November, partly due to tighter credit controls implemented by the central bank.
E.Sun Commercial Bank (玉山銀行) and CTBC Bank (中信銀行) reported annual growth in mortgages of 7.37 percent and 7.7 percent in November last year, compared with double-digit percentage growth previously, while Cathay United Bank Co (國泰世華銀行) registered a rise of 16 percent, lower than its previous annual growth rate of more than 20 percent, Lin said.
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