Banks write off sizeable bad card debts

This article was published by the Taiwan Headlines on March 29, 2006. It reports that as a result of the deterioration of the credit- and cash-card loan turmoil, delinquent rates for both cards exceeded the supervisory threshold of 3 percent at the end of February 2006. These were the highest rates since June 2004, when the data became available.

Facing such high delinquent rates, banks have started writing off their bad debts. According to statistics provided by the Financial Supervisory Commission, card-issuing institutions already wrote off nearly NT$30 billion of card-related bad debts during the first two months of 2006. This was more than the total pre-tax earnings of the 45 domestic banks - NT$24.3 billion - during that period. At this speed, the write-off of card-related debts may top NT$180 billion in 2006.

Along with the increase in delinquent rates, card business has continued to shrink. In February 2006 alone, approximately 830,000 credit cards were suspended in Taiwan. The number of credit cards in circulation, the number of effective cards, the outstanding amount of credit-card revolving credits, and the amount of credit-card consumption have all dropped. Specifically, the amount of credit-card consumption suffered the most serious decline - it tumbled almost 20 percent, to NT$103.5 billion, in February 2006.