Wed, Jan 03, 2001 - Page 17 News List

MOF calls for bank insurance

ANTICIPATING PROBLEMS The minister of finance proposed yesterday that NT$50 billion be earmarked for depository insurance as added protection for the new year

By Stanley Chou  /  STAFF REPORTER , WITH BLOOMBERG

The minister of finance proposed yesterday using government funds to create a NT$50 billion fund as added insurance against anticipated trouble in the banking industry.

But the measure is not likely to go forward soon, as the Legislative Yuan breaks for recess today.

Officials say that the earliest the proposal could be adopted is next month, when legislators reconvene.

Yen Ching-chang (顏慶章) has proposed creating the fund to support the Central Depository Insurance Company (CDIC), which holds roughly NT$10 billion in deposit insurance funds.

Currently, depositors are guaranteed NT$1 million in deposit protection when banking with a member of the CDIC.

Under the ministry's proposal, the agency will unconditionally honor all deposits made at the institutions, though the lenders will have to surrender their assets and reshuffle management.

``The ministry plans to adopt a simplified version of the [Resolution Trust Corporation] which will shoulder all deposits in exchange for banks' assets,'' said Huang Te-feng, section chief at the ministry's Bureau of Monetary Affairs.

Yen met with met legislative leaders from the opposition parties yesterday morning to push for his proposal.

The finance minister had wanted the measure to pass before the Lunar New Year, a time when the nation's farmers' and fishermen's associations elect new board members.

The finance ministry had wanted to have the NT$50 billion fund in place to deal with expected trouble in the banking sector, which many analysts have speculated could arise as liquidity tightens in the run-up to the Lunar New Year.

But opposition legislators took issue with Yen's attempts to rush the plan through the Legislative Yuan.

"This proposal is a relatively important issue, which requires a thorough consideration and discussion," said Lai Shyh-bao (賴士葆), convener of the New Party caucus in the legislature.

In addition to procedural issues, he said, there are a number of problems with Yen's proposal itself.

"For example, there should be a ceiling on how much depositors qualify for in compensation," Lai said.

Also, he said, the special fund should have a sunset clause of four to five years to prevent the measure from becoming a drain on the nation's resources.

Currently, the CDIC's NT$10 billion in deposit insurance is too little to cover obligations to depositors should a bank go under.

Legislative leaders of the KMT and People First Party support the finance ministry's proposed NT$50 billion fund in principle.

But they said the plan should be thoroughly discussed before implemented.

"Because there are only two days left in the current session, it's unlikely that the draft will be passed [now]," KMT and PFP lawmakers said.

This story has been viewed 3030 times.

Comments will be moderated. Keep comments relevant to the article. Remarks containing abusive and obscene language, personal attacks of any kind or promotion will be removed and the user banned. Final decision will be at the discretion of the Taipei Times.

TOP top