Minister of Finance Lee Yung-san (李庸三) yesterday said that Taiwan's NT$140-billion Financial Restructuring Fund (金融重建基金) lacked sufficient capital to bail out debt-ridden banks.
"In addition to Chung Shing Bank (中興銀行) and Kaohsiung Business Bank (高雄企銀), there are more banks in deep trouble. Therefore, it's necessary to raise more funds to tackle the problem," Lee told lawmakers during his first question-and-answer session yesterday in the legislature.
Lee, grilled by KMT legislator Lee Chia-chin (
Chinese-language media reported that the ministry plans to take back its promise to the financial sector by continuing to levy the 2 percent business tax on financial services until 2012.
"The tax will be waived no more than 10 years later," the Chinese-language Liberty Times said, citing a high-ranking finance official. The Business Tax Law (
Lee said that "more discussions on the proposal will be held at a committee meeting in April."
The fund, modeled after the US' Resolution Trust Corp (RTC), was created last July and NT$140 billion in public funds was allocated for the next four years to tackle the non-performing loan problems within the domestic banking sector.
An expensive problem
The finance ministry has already used NT$72 billion, compensating the 10 commercial banks involved in the takeover of the 36 grassroots financial institutions last August, leaving only NT$68 billion available to save other unhealthy banks.
Bailing out both Chung Shing Bank and Kaohsiung Business Bank could drain the fund of another NT$50 billion.
While not totally opposing the idea of raising more funds, Lee urged the ministry to detail plans for the fund's use.
"It's tax-payers' money and the government should be careful before adding more capital to the fund," he said.
New Party member Lai Shyh-bao (
"The government has to start filling financial holes now that the country has as much as NT$1.64 trillion in bad loans," Lai said.
"The ministry should soon study the creation of a mechanism to effectively recycle bad banks' impaired assets, which will fairly generate returns to the fund."
People First Party legislator Norman Yin (
"We may need as much as NT$3 trillion to NT$4 trillion in the fund to be able to genuinely deal with the problem," Yin said.