Taiwan's Increasingly Dangerous Credit Card Problem

The annualised charge-off rates on credit card and cash-card loans soared to 14% and 17% respectively in January 2006 from a level of around 6% in recent years. The initial rise in the delinquency rates in the third quarter of 2005 was due mainly to the banks' overly aggressive approach in growing these high-risk portfolios and inadequacies in their credit scoring models. But in Fitch's view, a subsequent worsening of credit quality has been triggered by the government's misguided response to the consumer debt fiasco.