Stock Market Leverage Needs Vigilance, Yang Chin-long: Banks Should Strictly Scrutinize New Youth Housing Loan 2.0

(CNA) The Central Bank, in its June board meeting, unusually took the initiative to mention the issue of credit expansion in the stock market, warning of potential risks. Central Bank Governor Yang Chin-long stated today that the Central Bank has repeatedly urged attention to changes in relevant indicators, because "a single spark can start a prairie fire."

Yang Chin-long appeared before the Legislative Yuan's Finance Committee today to deliver a special report on "The Central Bank's Mid-to-Long-Term Response Strategies and Policy Tools Amidst Multiple Risks in the Stock Market, Inflation, Exchange Rates, and the Property Market."

Regarding a legislator's inquiry about the Central Bank's stance on the impending approval of the New Youth Housing Loan 2.0, Yang Chin-long said that the Central Bank had previously offered suggestions, such as a 40-year mortgage term and a 5-year grace period. Even if the supervisory authority provides more lenient conditions, banks should still fulfill their gatekeeping obligations. "He may request 40 years, but it doesn't necessarily have to be given 40 years."

In its report, the Central Bank pointed out that with the active trading in the Taiwan stock market, the public is expanding borrowing for wealth management activities. The bank will closely monitor changes in stock market financing leverage and the flow of bank funds into the stock market; banks should pay attention to related credit expansion situations and risk control.

KMT legislator Lin Ssu-ming pointed out that after the Central Bank's June board meeting first warned about stock market credit risks, the Financial Supervisory Commission adopted a conservative attitude, believing the risks were controllable. Has the Central Bank's view on risk changed after this period?

Although Yang Chin-long previously stated that the current situation is still far from systemic risk, he emphasized today that during periods of significant market changes, even if regulations are met, vigilance is still necessary, "because I always feel that a single spark can start a prairie fire."

Regarding the popular description of the public using "four loans for one household" (mortgage, car loan, personal loan, stock financing) to leverage stock purchases, Yang Chin-long directly stated that the term "four loans for one household" is somewhat exaggerated and could lead people to mistakenly believe that everyone can leverage through these four channels simultaneously, which is practically impossible.

Yang Chin-long said that recently the Central Bank has reminded banks to pay attention to risk control. In fact, the top executives of banks have also proactively warned relevant departments to strengthen risk control. It is a good practice to enhance attention to relevant signals and market changes when things are not yet very serious. (Edited by: Lin Shu-yuan) 0709

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