03.16.2001
Big three commercial banks unperturbed by collateral regulations

• The new regulations on banks' collateral will be enacted in coming months. The Ministry of Finance has set a limit on the extent to which common stock can act as collateral for outstanding loans to 20% of the loan. Previously, there was no limit whatever. Valuation of the shares will be based on market price or book value of the company, whichever is lower.

• The big three commercial banks, Chang Hwa (2801 'Chang Yin'), First Commercial (2802 'Yi Yin') and Hua Nan (2803 'Hua Nan'), believe the new regulations will have a minimal affect on them as they claim that only 6% of their collateral is in shares, much lower than the required limit.

• Banks regard shares as high risk collateral, and are only accepted for short-term loans. We believe most of the large banks act prudently in accepting shares as collateral, especially after the market crash in 2H00.

• We believe the new regulations will not affect big banks' lending policies, but may post a threat to newer or smaller operations.

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