02.12.2001
New regulations proposed for banking industry

• In order to strengthen banks' capital structure, the Ministry of Finance (MoF) is to increase penalties for those banks with a capital adequacy ratio/BIS ratio below the required 8%. The more severe penalties will include limitations on investments and may even force closure of certain areas of business. Previously, limitations were restricted to profit allocation.

• The MoF will also decide before the end of March on an adjustment to the upper limit on bank lending to related persons or businesses. Penalties for infringement will range from NT$2m to NT$10m. Concerned over the specter of a banking crisis, the MoF is taking a tough line with domestic banks' credit risk incurred by lending to big enterprises.

• In view of the significant number of non-performing loans (NPLs), we expect further stringent guidelines to promote restructuring of the banking industry and prevent further financial crises will be forthcoming. Banks with large business group backing will have to take serious heed of any new regulations. We believe adjustment of the upper lending limit is an appropriate measure.

WilliamFong@Primasia.com +886-[0]2-2547-8864