The central bank has further tightened controls on mortgage lending. The FSC will conduct inspections of 20 financial institutions to ensure they are in compliance.
Taiwan’s Financial Supervisory Commission (FSC) to conduct a second round of inspections by the end of the year to ensure FIs are complying with central bank credit checks.
In the first round of inspections last year, the FSC carried out inspections of 13 companies, finding that ten banks had failed to raise interest rates for contractors and real estate developers who were extending their loan maturities. . Banks also failed to require borrowers to develop vacant land as planned, leading to hoarding. Additionally, three banks failed to control the risk on new loans to developers who used unsold homes as collateral, and six banks were found to be lax with borrowers who used unused industrial land as collateral.
The second round of inspections will be more comprehensive than the first, due to concerns about inappropriate mortgage approvals and the overheating real estate market. The FSC will apparently review 10 banks, seven credit unions and three bill finance companies, focusing on their construction lending, regular mortgage and luxury home lending practices.
The inspections will target banks with a substantial increase in mortgages in recent years – but not those targeted in the first round – and credit unions with an increase in construction loans. The FSC will also focus on banks’ business relationships with contractors and real estate developers, to ensure they do not affect mortgage approvals for regular consumers.
From the end of last year to October, the amount loaned by banks to entrepreneurs and real estate developers rose 10.25% to TWD 3.8 trillion (US $ 135.7 billion).
Taiwan’s central bank has implemented selective credit control measures three times since December 2020 to curb real estate and land hoarding.
The most recent checks lowered the LTV (loan-to-value) ceiling for mortgages for a third house or luxury home to 40%, for home loans to 50% and for unsold new homes to 40%. The LTV ratio was also capped at 40 percent on mortgages for unused land in industrial estates.
To further contain the rise in house prices and avoid excessive flows of credit resources from bill financing companies to the real estate market, the FSC also recently required invoice finance companies to limit their commercial promissory note guarantee business for the real estate industry to 30% of their total guarantee activity.
Bill finance companies should also perform KYC operations during the review phase to properly classify property guarantee activities and integrate related operations for the purpose of internal audit and self-checks, FSC said. .
Other measures implemented over the past year include a system for recording real prices for all real estate transactions, a change in the built-in taxes on real estate and land transactions, higher tax rates on sales of properties within five years of purchase and more stringent requirements on the pre-sale project. transfers.