Taiwanese banks saw average broad NPL ratio hit new low of 3.77% in Feb.

Taipei, April 4, 2005 (CENS)--The average broad non-performing loan (NPL) ratio of Taiwan's domestic banks hit record low of 3.77% as of the end of February, edging down 0.01 of a percentage point from 3.78% posted a month earlier, according to the statistics compiled by the Cabinet-level Financial Supervisory Commission (FSC).

In the same month, the average narrow NPL ratio inched up by 0.01 of a percentage point to 2.79%, with NPLs totaling NT$433.7 billion (US$12.76 billion at US$1 = NT$34), an increase of NT$900 million (US$26.47 million). However, the total ‘under watch' loans shrank by NT$2.6 billion (US$76.47 million) to NT$152.5 billion (US$4.49 billion).

As of the end of February, most domestic banks saw their NPL ratios fall under 5%, a level set by FSC. Only six banks recorded the ratios of over the level, including Enterprise Bank of Hualien, Taitung Business Bank, Bowa Bank, Chung Shing Bank, ChinFon Commercial Bank, and The Chinese Bank. Of them, Bowa saw the highest NPL ratio of 19.59%.

Chung Hui-chen, deputy director of the Bureau of Monetary Affairs (BOMA) under FSC, noted that most domestic banks with higher NPL ratio recorded capital adequacy ratio of lower than the threshold of 8%. Chung noted that starting on July 1 of this year, FSC will monitor the quality of the assets of domestic banks based on broad NPL ratio, which means the ‘under watch' loans have to be included.


As of the end of February, the average NPL coverage ratio of domestic banks stood at 40.89%, dipping 0.43 of a percentage point from a month earlier but still above the 40% standard set by FSC. The bad loan coverage ratio is the provisions of banks against their NPLs, representing their capability of handling bad loans.

Of the island's total 48 domestic banks, 42 or 88% of them recorded a NPL ratio of below 5% at the end of February as a result of their efforts in writing off bad loans. Nevertheless, Chung emphasized that FSC would keep urging those banks with NPL ratios of more than 5% to adopt effective measures to improve their asset quality.