Mon, May 20, 2002 - Page 17 News List

CDIC decides to sell off Fifth Credit Cooperative

By Joyce Huang  /  STAFF REPORTER

After taking over the financially distressed Fifth Credit Cooperative of Tainan (台南五信) last Friday, the Central Deposit Insurance Corp (CDIC, 中央存保) plans to auction off the cooperative within a month, CDIC's President Chen Chang-sang (陳戰勝) told the Taipei Times yesterday.

"The CDIC will make an official announcement on Wednesday to invite qualified bidders, who may spend another two to three weeks conducting a due diligence check on the cooperative," Chen said.

The insurance body will further discuss bidder qualifications and auction matters with the Bureau of Monetary Affairs under the Ministry of Finance before finalizing the deal's details, he said.

"With a capital adequacy ratio above 8 percent, potential buyers will be required to have a minimum capital of NT$300 million or NT$400 million, no higher than NT$700 million since this is just a small-scale cooperative," Chen said.

Lenders in Taiwan are required to hold capital equal to at least 8 percent of their assets.

During a routine examination in February, the CDIC discovered that the cooperative's non-performing loan rate had risen to 40 percent in January and that its asset value would soon turn negative, Chen said.

After concluding that the cooperative's non-performing collateral loans had deteriorated, pushing it further in the red, the CDIC decided to take over its management under the ministry's instruction.

The cooperative's management team appeared to welcome the government's move, Chinese-language media reported.

According to the cooperative's general manager, Chou Tsung-cheng (周宗正), the cooperative had a net value of NT$700 million last year, the reports said.

But early this year, a sour domestic economy had brought about several large loan defaults, dragging down the cooperative's performance, Chou said in the reports.

Before the government takeover, the cooperative had planned to merge with another financial institution, but no agreements had been reached, the reports quoted Chou as saying.

Chen assured the cooperative's depositors yesterday that the government-run Financial Restructuring Fund (金融重建基金) will absorb part of the deficit and that the cooperative's cash flow was normal in April, with total assets of NT$12 billion from saving accounts, of which NT$8 billion have been granted to borrowers.

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