FSC Taiwan Requires Banks to Control Real Estate Concentration Risk
To supervise banks to strengthen the risk control of real estate loans and improve banking operations, FSC Taiwan will require banks to strengthen the management of the concentration risk of "construction loans" undertaken by banks. In case of excessive concentration of "construction loans," it is advisable to diversify the allocation of risky assets, moderately reduce the concentration risk, or moderately increase the allowance for bad debts to accumulate the ability to bear risks.
As of the end of October 2020, the ratio of "construction loans" undertaken by all domestic banks to total loans was 8.62%. For banks having high degree of concentration in "construction loans," FSC will require the banks to propose and implement improvement plans on their own and will take necessary supervisory measures in due course. FSC highlights that banks should implement risk concentration control for real estate loans and follow the relevant provision of the Banking Law, incorporate funds; operating costs; and risk factors into loan pricing measures, and appropriately increase allowances for bad debts based on risk management. FSC has already reminded banks to fully disclose information to consumers on real estate credit, at a meeting conducted in November 2020.
Related Link (in Chinese): Press Release
Keywords: Asia Pacific, Taiwan, Banking, Credit Risk, Real Estate Loans, Concentration Risk, FSC Taiwan
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