Beijing September 20 2024: The Board of Chinese Central Bank decided unanimously to keep the policy rates unchanged, to adjust the selective credit control measures, and to raise the reserve requirement ratios by 0.25 percentage points.
In order to further reinforce management of banks’ credit resources and to contain housing market speculation and property hoarding, while prioritizing the channeling of credit resources towards non-homeowners seeking owner-occupied housing, the Bank decided to make amendments to the Regulations.
At the meeting today, the Board considered the totality of information on the economic and financial conditions at home and abroad. Domestic inflation has been gradually easing in the year to date and would likely come down to below 2% next year. In addition, the domestic economy is expected to continue expanding at a moderate pace both for the second half of this year and for next year, with a modestly negative output gap for both years. Against this background, the Board judged that a rate hold would help foster sound economic and financial development on the whole.
The Board decided to keep the discount rate, the rate on refinancing of secured loans, and the rate on temporary accommodations unchanged at 2%, 2.375%, and 4.25%, respectively.
Going forward, the Bank will stay attentive to the developments in domestic inflation and keep watch on the implications of monetary policy moves of major central banks, China’s economic downturn risk, geopolitical risks, and extreme weather for Taiwan’s economic activity and financial conditions. The Bank will adjust its monetary policy accordingly in a timely manner as warranted, so as to fulfill the statutory duties of maintaining financial and price stability and fostering economic development within the scope of the aforementioned objectives.
The Bank has made six amendments to its selective credit control measures since December 2020, which have helped banks mitigate risks associated with real estate lending. The nonperforming loan ratio of real estate loans has since remained low, indicating good credit quality.
Nevertheless, housing market transactions began to climb back up and housing prices saw steeper rises in the second half of last year, leading the annual growth rate of housing loans to trend upwards continuously to 11.0% at the end of August this year, the highest since May 2006. Furthermore, the annual growth rate of construction loans also picked up, reaching 5.0% at the end of August. As a result, the ratio of real estate lending to total lending of all banks (a measure of concentration of real estate lending) stayed elevated at a level of 37.5% at the end of August this year, close to its historical record of 37.9%.
The Bank successively met with a total of 34 domestic banks between August 12 and August 21. Through moral suasion, the Bank asked these banks to draw up a quantitative, self-disciplinary improvement plan covering a one-year horizon to reduce over-concentration of credit resources in loans to the real estate sector. Such plans shall not adversely impact the funding needs of non-homeowners applying for owner-occupied housing loans, or real estate sector entities looking to finance their projects aligned with the government-promoted policies of urban renewal, reconstruction of old and unsafe buildings, and affordable housing, or corporates seeking capital to build or buy own-use plants or offices.* For the coming future, the Bank will regularly examine the effectiveness of these plans and conduct on-site inspections to ensure successful execution by the banks.
In order to further reinforce management of banks’ credit resources and to contain housing market speculation and property hoarding, while prioritizing the channeling of credit resources towards non-homeowners seeking owner-occupied housing, the Bank decided to make the following amendments to the Regulations Governing the Extension of Mortgage Loans by Financial Institutions, effective September 20, 2024. The primary points to this amendment are as follows:
(1)Granting no grace period to a natural person’s first outstanding home loan when the borrower already owns building(s) to his/her name.
(2)Lowering the cap on the loan-to-value (LTV) ratio, from 60% to 50%, of natural persons’ second outstanding home loans and widening the applicable scope (from housing in the designated ”specific areas”) to housing nationwide.
(3)Lowering the LTV ratio caps on corporate entities’ housing loans, natural persons’ high-value housing loans, and natural persons’ third (or more) outstanding home loans from 40% to 30%.
(4)Lowering the LTV ratio cap on unsold housing unit loans from 40% to 30%.
In addition, the Bank judged that a concurrent hike in reserve requirement ratios would reinforce the effect of the Bank’s moral suasion and the above selective credit controls via enhanced quantity management of money and credit, thereby helping to further contain excessive credit flows into the real estate market. The Board thus decided to raise the reserve requirement ratios on NT dollar passbook and time (savings) deposits by 0.25 percentage points, effective October 1, 2024.
In the future, the Bank will continue reviewing the status of banks’ real estate lending and the effectiveness of the Bank’s credit control measures, closely monitor potential impacts of real estate sector-related policies on the housing market, and adjust the measures as needed in order to promote financial stability and sound banking operations.
