Agricultural bank idea gains steam

With the Ministry of Finance's planned clean-up of foundering grassroots financial institutions this month, the nation's top agriculture officials said they are proposing the establishment of a "national farmers' bank" to supervise the financial operations of credit cooperatives.

Lee Jen-chyuan (李健全), vice chairman of the Cabinet-level Council of Agriculture, said the council is interested in moving forward with the idea of trans-forming the state-run Taiwan Cooperative Bank (合作金庫) into a national agriculture bank -- if the proposed merger between Taiwan Cooperative and the ChinFon Commercial Bank (慶豐銀行) is realized, a Chinese-language newspaper quoted Lee as saying over the weekend.

Taiwan Cooperative, the nation's second-largest bank in terms of asset value, announced in January that it plans to merge with ChinFon in six months through a share swap.

According to Lee, 314 credit cooperatives under the farmers' and fishermen's associations are in operation, with 36 of them -- whose total liabilities exceed assets -- being targeted for reorganization.

The finance ministry is reportedly planning to establish a resolution asset trust commission within the next two weeks. The establishment of the commission has been made possible by the passage of related regulation by the legislature in a special session last week.

The paper said some of the problematic credit cooperatives will be shut down while some will be acquired by other financial institutions.

Lee Tung-hao (李桐豪), a professor at National Chengchi University, said the national agriculture bank concept was good, but that directly transforming a credit cooperative into the bank was questionable, the report said.

He also suggested establishing three regional agriculture banks -- in northern, central and southern Taiwan, respectively -- in an effort to facilitate sound financial basis in the agricultural sector.

Whether Taiwan Cooperative can be transformed into a national agriculture bank will depend on further discussion with the bank's employees and relevant government agencies, including the central bank and the finance ministry, Lee said.

He also stressed that it was imperative to deal with these problematic credit cooperative as soon as possible.