05.28.2001
MoF releases new guidelines in attempt to restructure debt

• The Ministry of Finance (MoF) has announced three guidelines for banks' handling of restructured debt: (1) The borrower must obtain permission from the MoF to extend the maturity on loans; (2) All banks involved in the loans concerned must reach an agreement on rollover; and (3) The loans may be excluded from non-performing items if all terms of the agreement in (2) are fulfilled.

• In 1Q01, overdue loans amounted to NT$233b (excluding non-performing loans), equivalent to 2% of outstanding loans.

• The MoF has previously used various other measures to help problematic enterprises prevent loans from being recalled by lending banks. However, with the economy in slowdown, cases of bad debt are increasing and the Ministry has had to revise its regulatory guidelines.

• VB Primasia Opinion: The new guidelines prohibit domestic banks from extending loans without the consent of the MoF. However, we do not see the formalizing of procedures through the MoF as a solution to the problem. Rather, we believe it will exacerbate the nondisclosure problem and lead to a continuation of the practice of rolling over bad debt.

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