"Premier" Wu Den-yih said yesterday that it is the government's responsibility to provide proper channels for a free and healthy flow of funds in the market.

Fielding questions at a legislative session, Wu said property speculators have fueled a surge in domestic housing prices, particularly those in Taipei City, causing prices to spiral to levels that are prohibitive for ordinary home buyers.

"Excessive funds and insufficient supply are two major reasons causing the speculation," Wu said in response to a question raised by ruling Kuomintang Legislator Lo Ming-tsai.

How to guide these funds into proper channels, such as businesses that can in turn create job opportunities, is the government's responsibility, Wu said.

He said the 2008 global financial crisis triggered by the failure of subprime mortgages in the United States has just passed and Taiwan should take it as a lesson.

Lo asked Wu whether checking soaring real estate prices is the government's top priority in the future.

"It is now," Wu answered.

Lo also asked Sean Chen, chairman of the Financial Supervisory Commission under the Executive Yuan, who was on hand at the session, whether the government can try to divert excessive funds into the cultural and performance art sectors.

Lo said many operators of cultural or art performance groups have suffered from difficulties in securing funds or loans from banks, which have directly affected their operations.

For his part, Chen said he believes that the banks were reluctant to grant loans to art or cultural groups because they had difficulties evaluating the value of intangible assets.

"We are now working to set standards or criteria for the banks to assess or evaluate the value of intangible assets," Chen told Lo.

"Finance Minister" Lee Sush-der announced Monday that government-controlled banks have been told to tighten credit to real estate investors or luxury home buyers in a bid to check soaring housing prices.

Speaking at a legislative hearing, Lee said public banks have recently begun to tighten credit to investors or luxury home buyers by limiting the amount of a house's value that can be mortgaged and providing no grace periods to pay down the principal on their mortgages.

Land Bank of Taiwan Chairman Wang Yao-shing said his bank's maximum loan-to-value ratio - the proportion of a loan in relation to the property's value - for buyers of third homes has been reduced by 10-20 percentage points.

China Daily/CNA

(HK Edition 03/10/2010 page4)