Premier Cho Jung-tai (卓榮泰) reiterated last week that the government had not imposed restrictions on housing loans, amid heavy news coverage and online discussion of the issue as the housing market remains hot. Cho said the authorities were concerned about whether banks’ credit risk management was adequate, adding that the Executive Yuan would meet with the central bank to devise a plan to address loan applicants’ concerns without harming first-time buyers.
However, despite the premier’s assurances, the issue has not only raised questions about whether the much discussed loan restrictions are a sign of a potential asset bubble, but it also puts the credibility of regulators — the central bank, the Financial Supervisory Commission (FSC) and the Ministry of Finance — to the test, on the general health of the financial market and the government’s risk control mechanisms.
It all started last month, when the central bank met with 34 local lenders, telling them to propose plans by Friday to cool their real-estate lending or face central bank-imposed measures if persuasion fails. The move underscores just how concerned the central bank is about Taiwan’s high property prices and the risk for banks when their credit portfolios are overconcentrated on real-estate loans.
The central bank later clarified that it was urging lenders to strengthen their self-discipline on real-estate lending and prevent funds from flowing to investors holding nonowner-occupied homes or people who hoard properties. The central bank also said it hopes lenders’ real-estate loans could fall to 35 percent to 36 percent of total loans, after the ratio reached 37.4 percent as of June 30, close to the 37.9 percent record.
The worries are also related to several banks having been on the FSC’s radar as their real-estate lending approaches the regulator’s property loan quota for banks. Under Article 72-2 of the Banking Act (銀行法), loans extended for residential and commercial properties may not exceed 30 percent of the aggregate of a bank’s deposits and financial debentures, or its available funds on hand. The commission’s data showed that as of June 30, local lenders’ property loans reached 26.62 percent of their total deposits and debentures on average, while 13 banks’ ratio had exceeded 27 percent.
Local lenders must improve their high concentration of real-estate loans, as it is crucial for balanced economic development and key to the reasonable allocation of banks’ resources. Moreover, if the central bank decides to further raise its policy rates, or if the asset bubble collapses, people who cannot pay their mortgages would likely dump their properties on the banks, which would result in greater risks for the banking system. After all, there are global precedents of how a slumping property market — such as the asset bubble collapse in Japan during the 1990s, the US subprime mortgage crisis in 2008 and the property debt crisis in China today — could cause financial turmoil and economic slowdown.
The introduction of a government program in August last year that offers preferential loans for first-time home buyers with more flexible conditions and favorable terms played a role in rekindling a hot housing market this year. It led some lenders to hastily increase their property loans in the short term, which not only caused their property lending to move closer to the regulatory ceiling of 30 percent of total loans, but also forced them to set restrictions on people’s mortgage applications, including delaying loan approvals, adjusting mortgage terms and suspending new mortgage operations.
It is correct for the central bank to treat the rising property loans as a “code red,” but as the concerns about loan restrictions affect homebuyers as well as financial and property markets, the financial regulator and monetary policymaker must deal with it cautiously and keep problems from growing severe, without compromising the government’s efforts of achieving housing affordability and availability.
Would China attack Taiwan during the American lame duck period? For months, there have been worries that Beijing would seek to take advantage of an American president slowed by age and a potentially chaotic transition to make a move on Taiwan. In the wake of an American election that ended without drama, that far-fetched scenario will likely prove purely hypothetical. But there is a crisis brewing elsewhere in Asia — one with which US president-elect Donald Trump may have to deal during his first days in office. Tensions between the Philippines and China in the South China Sea have been at
A nation has several pillars of national defense, among them are military strength, energy and food security, and national unity. Military strength is very much on the forefront of the debate, while several recent editorials have dealt with energy security. National unity and a sense of shared purpose — especially while a powerful, hostile state is becoming increasingly menacing — are problematic, and would continue to be until the nation’s schizophrenia is properly managed. The controversy over the past few days over former navy lieutenant commander Lu Li-shih’s (呂禮詩) usage of the term “our China” during an interview about his attendance
Bo Guagua (薄瓜瓜), the son of former Chinese Communist Party (CCP) Central Committee Politburo member and former Chongqing Municipal Communist Party secretary Bo Xilai (薄熙來), used his British passport to make a low-key entry into Taiwan on a flight originating in Canada. He is set to marry the granddaughter of former political heavyweight Hsu Wen-cheng (許文政), the founder of Luodong Poh-Ai Hospital in Yilan County’s Luodong Township (羅東). Bo Xilai is a former high-ranking CCP official who was once a challenger to Chinese President Xi Jinping (習近平) for the chairmanship of the CCP. That makes Bo Guagua a bona fide “third-generation red”
Russian President Vladimir Putin’s hypersonic missile carried a simple message to the West over Ukraine: Back off, and if you do not, Russia reserves the right to hit US and British military facilities. Russia fired a new intermediate-range hypersonic ballistic missile known as “Oreshnik,” or Hazel Tree, at Ukraine on Thursday in what Putin said was a direct response to strikes on Russia by Ukrainian forces with US and British missiles. In a special statement from the Kremlin just after 8pm in Moscow that day, the Russian president said the war was escalating toward a global conflict, although he avoided any nuclear