FSC Adopts Enhanced Measures for the Management of Real Estate Credit Extension Business of Banks
2021-12-01
The Financial Supervisory Commission (FSC) stated that banks must abide by related conditions, credit limits, and other management measures in the “Regulations Governing the Extension of Mortgage Loans by Financial Institutions” of the Central Bank when processing the guarantees of commercial papers or corporate bonds if the issuers use the proceeds to purchase or construct real estate, which is used as collateral, to stabilize the credit structure of banks and strengthen the risk management of real estate loans of banks. These requirements shall be incorporated into banks’ internal control and audit systems and included as critical internal audit items.
As banks’ credit extension business consists primarily of loans, and guarantees for commercial papers or corporate bonds are minor, the FSC shall reference the management of real estate business guarantees by bills finance companies to jointly review the concentration of such guarantees and construction loans by domestic banks. As of the end of June 2021, the ratio of construction loans plus real estate business guarantees to total loans and guarantees for commercial paper and corporate bonds by all domestic banks was 9.45%. After adding guarantees for real estate businesses, the FSC shall require banks with significant increases in their concentration ratios to propose improvement plans and formulate management measures.
The FSC has requested domestic banks to adopt relevant management measures to improve the management of real estate credit extension businesses and maintain financial stability. The FSC emphasized that banks must implement the 5Ps principle for real estate credit extension businesses to prevent the flow of credit resources to non-real demand. In addition, they must control the credit limit and concentration of the overall real estate credit extension businesses based on their risk tolerance and strengthen post-loan management. They must also appropriately evaluate and increase the allowance for doubtful accounts based on a risk management approach to enhance their risk-bearing capacity and enhance the health of business operations.
Contact unit: Legal Affairs Division, Banking Bureau
Telephone: +886 (2)8968-9650
If you have any questions, please send an email to:
https://fscmail.fsc.gov.tw
As banks’ credit extension business consists primarily of loans, and guarantees for commercial papers or corporate bonds are minor, the FSC shall reference the management of real estate business guarantees by bills finance companies to jointly review the concentration of such guarantees and construction loans by domestic banks. As of the end of June 2021, the ratio of construction loans plus real estate business guarantees to total loans and guarantees for commercial paper and corporate bonds by all domestic banks was 9.45%. After adding guarantees for real estate businesses, the FSC shall require banks with significant increases in their concentration ratios to propose improvement plans and formulate management measures.
The FSC has requested domestic banks to adopt relevant management measures to improve the management of real estate credit extension businesses and maintain financial stability. The FSC emphasized that banks must implement the 5Ps principle for real estate credit extension businesses to prevent the flow of credit resources to non-real demand. In addition, they must control the credit limit and concentration of the overall real estate credit extension businesses based on their risk tolerance and strengthen post-loan management. They must also appropriately evaluate and increase the allowance for doubtful accounts based on a risk management approach to enhance their risk-bearing capacity and enhance the health of business operations.
Contact unit: Legal Affairs Division, Banking Bureau
Telephone: +886 (2)8968-9650
If you have any questions, please send an email to:
https://fscmail.fsc.gov.tw
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Update：
2021-12-23