CBC supports open-ended finance sector shake-up

Michelle Hsu, The China Post

“The central bank will provide unlimited funds to support the government’s action in taking over cash-strapped grass-root financial institutions,” the Central Bank of China (CBC) Governor Perng Fai-nan asserted yesterday, reiterating the government’s determination to restructure Taiwan’s financial market.

The Ministry of Finance (MOF), in accordance with the measure of the financial restructuring fund, dispatched certain staff members from the Central Deposit Insurance Company and eight major commercial banks to take over the operations of the credit departments of 36 farmers and fishermen’s cooperatives, the first move since the fund law passed the Legislature in June. To calm the public and to prevent potential bank runs, Perng said yesterday that the central bank will provide as much capital as needed if the depositors run to withdraw cash from these financial institutions.

Meanwhile, “the government will monitor the operations of the affiliates of these financial institutions, with a view to keep them in normal operations,” said Minister of Finance Yen Ching-chang.

In addition, the MOF will keep a close eye on the operations of other grass-root financial institutions and will take actions on them if necessary,” Yen said.

In fact, an MOF official pointed out, the ones which have been taken over by the MOF-managed financial restructure fund should become much safer for the public to do business with.

The 36 co-ops were the priority targets of the financial restructure fund because their assets have turned negative, threatening a crisis in their operations. Certain others, as the MOF official revealed, have similar problems since their assets have almost become zero or negative.

Under the financial restructuring measure, there are three major criteria for the government fund to take over private financial institutions — when a financial institution sees its assets turn negative, when a financial institution become unable to honor its debts, or when a financial institution becomes unable to maintain normal operations due to a sudden deterioration in its financial situations.

The CBC’s Perng has expressed his full support for the government takeover of the financially troubled grass-root co-ops, the MOF however insisted that the budget of NT$140 billion for the financial restructure fund is definitely enough, regarding the small-scaled operations of the co-ops.

Strictly speaking, the fund has not completed the takeover procedure. Last Friday’s action is the first move for the MOF-organized financial staff members to supervise the operations of the 36 co-ops. The MOF reportedly held a close-door meeting to discuss detailed issues about the takeover, including the cost for each case. Most of the co-ops are located in central or southern Taiwan, and the Sungshan co-op is the only one located in Taipei area.