TAIPEI Fears erupted here Monday that swelling debts held by domestic banks may spawn a widespread banking crisis despite repeated official denials.
According to an AFP report, lawmakers warned if the issue was not carefully handled, the island, which passed almost unscathed through the 1997 regional financial crisis, may be embroiled in wholesale financial turmoil.
"The Finance Ministry said the non-performing loans (NPL) of grass-root financial institutions stood at an average of 6.19 at the end of August," said parliamentarian Chien Hsi-Chieh of the ruling Democratic Progressive Party (DPP).
"However our estimate put the figure at around 15.7 percent." One provincial financial association for farmers was said by the DPP to have 90 percent non-performing loans. Two other similar institutions had 80 percent non-performing loans.
"What I'm really worried about is the government's inability to handle the crisis," Chien said.
The concern came on the heels of an article printed in the November 11 issue of the Britain-based Economist magazine.
In the article titled "Too Many Debts to Settle", it said the island may suffer its own (belated) version of the Asian crisis perhaps even before the Chinese New Year in January." It said analysts felt bad loans may rise to two to three times the government estimate of 5.0 percent, and "many fear there is a fully-fledged banking crisis in the offing." Government officials were swift to dismiss the warning, which, along with wall street's plunge over the weekend, brought down domestic share prices by 4.8 percent on Monday. The Taiwan Stock Exchange weighted price index fell 295.22 points to 5,793.52.
Taiwan's Central Bank Governor Perng Fai-Nan said he regretted the article.
"It's a good magazine ... but much of the article was imagination," Perng said shortly before he departed for Brunei for an informal leaders meeting at the Asia Pacific Economic Cooperation (APEC) forum.