Two financial institutions on the verge of takeover

Chen made the remarks when asked by lawmakers whether there are financial institutions likely to be taken over by the government, during a finance committee meeting of the Legislative Yuan.

Chen told lawmakers that since the RTC (resolution trust company) fund was established in July 2001, the fund has helped as many as 56 financially-troubled financial institutions smoothly withdraw from the financial market by settling relevant bad assets.

At the moment, Chen continued, two financial institutions are on the brink of being taken over by the CDIC, including one bank and one farmers' credit association. The bank in question has seen its accumulated losses exceed one third of its paid-in capital, with its capital adequacy ratio falling below 8 percent. The credit department of the problematic farmers association has suffered negative net worth.

Chen stressed that the CDIC is closely monitoring the operations of these two troubled financial institutions and is asking them to step up management of their liabilities.

Chen also noted that the compensation reserve funds have been used up, and the CDIC has borrowed NT$50 billion to replenish the funds.

Chen continued that the CDIC will manage to raise more funds if needed to settle bad assets of resource-strapped financial institutions that have to be taken over.

The CDIC is mulling hiking the deposit insurance premium rates, so as to step up accumulation of reserves against deposit insurance compensation.

In addition, starting in 2011, part of the business tax payment made by banks will be appropriated as reserves against deposit insurance compensation.

On the same occasion, Finance Minister Lee Shu-der said that amid the lingering impact of the global financial tsunami over the past year, it's inappropriate to raise the deposit insurance premium rates. But after financial conditions become stable, the deposit insurance premium rates will be adjusted upward to secure steady injection of compensation reserve funds, according to Lee.

Subscribe to The China Post and save 25%. Click here

SharePrintEmail

Write a Comment

Terms

Enter your comments - 3000 characters max

Type in image code

Submit

 Receive China Post promos
 Respond to this email