(Bloomberg) -- Taiwan’s central bank announced broader efforts to get banks to cool their property lending, warning it’s prepared to take action if persuasion doesn’t work.
The monetary authority has met with 34 local lenders this month and told them to propose improvement plans by Sept. 6, it said in a statement. It will review the effects of the plans routinely and conduct on-site inspections, amid concerns that credit is excessively concentrated.
Governor Yang Chin-long personally attended meetings with banks, underscoring just how concerned policy makers are becoming about Taiwan’s high property prices and the risk for banks. The central bank in June raised the reserve requirement ratio to cool the market, and minutes of that meeting showed disquiet that rising rents are fueling inflation.
“If moral suasion towards banks doesn’t affect the trend, we might implement direct measures” said Alan Pan, director general of the central bank’s banking department.
Some banks also think the housing market is overheated and have started to lower mortgage ratios and demand higher interest rates, he said.
“It’s necessary for Taiwan’s banking industry to improve the high concentration of real estate loans in order to prevent problems before they occur,” the central bank said in the statement. “There are global precedents of overheating property markets leading to financial crises and economic recession.”
The central bank said it will adjust selective credit controls when needed, to prevent funds from flowing into the real estate market excessively. It said it hopes property could fall to 35% to 36% of total loans. The ratio was 37.4% as of end-June, close to the record of 37.9%, its statement said.
In the meetings, the central bank exchanged views with lenders on the recent growth of real estate lending, Pan told Bloomberg earlier. No conclusion on any limit to the loan amount has been reached, and Pan said the central bank plans to take their views into consideration before considering future moves.
Story Link: Taiwan Central Bank Urges Banks to Control Property Loans (1)
--With assistance from Cindy Wang and Argin Chang.
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