Wednesday, February 22, 2006

Credit Card Problems Bedevil the Beautiful Island

A burgeoning social and financial problem....credit cards.

Taiwan's ballooning credit card market has banks bracing themselves for another round of bad loan write-offs which is expected to peak over the next three to four months.

The write-offs are expected as American Express sounded the alarm bells last week and suspended the issue of all new credit cards after its non-performing loan (NPL) ratio caused a bout of jitters and spiralled to 3.21 percent.

"Credit conditions are likely to get worse before getting better. We expect bad loan write-offs to peak in the second quarter of this year," said Victor Tseng, a KGI Securities analyst.

December was the worst month in a year for credit card users, causing the banking sector to write-off 6.32 billion Taiwan dollars (195 million US) and prompting the government to consider legislation aimed at curbing credit card spending.

How are things here?

This followed aggressive marketing by banks in the highly competitive industry which has saddled Taiwan with twice as many credit cards as there are people.

Nothing like imitating the United States.

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