Fitch Ratings has lowered its forecast of losses by Taiwanese banks for the year, from NT$100 billion to NT$30 billion, citing better-than-expected asset quality maintenance during the global credit crisis. In a report released Tuesday, the company stated that the banks were able to maintain good asset quality because of multi-year deleveraging by Taiwanese households and corporations before the financial crisis hit in 2008. Nevertheless, the rating agency warned that the banking sector's large credit exposure to the troubled dynamic random access memory (DRAM) chip makers remains a significant threat to their asset quality over the short and medium term. Local DRAM chip makers have all been losing money for most of the past year because of oversupply, while demand for chips have declined in the face of the global economic crisis. Although local banks have done a good job in maintaining their asset quality in the first half of this year, other factors, including Taiwan's persistent economic slump, weak profit margins and high credit costs, could drive down their profits, said Jonathan Lee, senior director of the financial institutions group at Fitch Ratings Taiwan. Taiwan's banking and financial reform plan may have been postponed because of the sharp economic recession from the fourth quarter of last year and the recent damage caused by Typhoon Morakot, according to Lee. Over the next two to three years, Taiwan would not likely see mergers of large state-owned banks, Lee predicted. 