Taiwan FSC Moves Early to Rein In Brokers’ Stock-Backed Lending Risks

Taiwan’s buoyant stock market has encouraged some retail investors to layer mortgages, auto loans and unsecured personal credit with margin financing or stock-backed loans — a practice dubbed “four loans under one roof.” The Financial Supervisory Commission sees three vulnerabilities: multiple borrowing, working-capital loans being diverted into shares, and data gaps among banks, brokers and insurers. Those blind spots can obscure a customer’s total leverage and amplify forced-sale and default risks when markets reverse.

The FSC said on July 28 that customers with multiple loans represented only a “very low single-digit” share, while banks’ consumer-loan nonperforming ratio stood at 0.14%-0.16%. In the six months through June, small unsecured loans rose NT$55 billion, or 7.29%, compared with a NT$233.9 billion, or 2.03%, increase in mortgages. The regulator plans two-way data sharing between the Joint Credit Information Center and Taiwan Stock Exchange, enabling banks and brokerages to assess cross-sector exposure and strengthen reviews of highly indebted borrowers.