Bank heads called `robbers' by pundit

The chiefs of Taiwanese banks with high non-performing loan (NPL) ratios are no better than sophisticated bank robbers who should be brought to justice, a professor of finance, William Lin (林蒼祥) said yesterday.

"The harm these financial offenders, whose gains were usually immeasurable, did to social justice and financial order are no less than those caused by bank robbers," Lin said at an international conference on improving financial asset quality, organized by the Taiwan Management Institute.

Taiwan's overcrowded market of 52 banks has managed to accumulate a whopping NT$1.05 trillion in bad loans -- the tab of which taxpayers are expected to pick up.

"After spending so much of the taxpayers' money and the nation's resources, the government should put teeth into its financial reform plan to gain public support," Lin added.

That plan should include toughening criminal penalties, forcing guilty parties to cough up embezzled funds and speeding up the processing of court trials to put the white-collar thieves behind bars as soon as possible, Lin said.

To accelerate criminal investigations, Lin cited the US experience as an example, saying that all financial offenders should be asked to provide evidence to prove their innocence.

"Otherwise, they should all plead guilty," Lin said.

The Ministry of Finance is currently studying the possibility of forcing court trials for financial offences to be concluded within four years. But Lin opposed the idea saying that "four years is too long."

Sharing a similar view, Chen Mu-tsai (陳木在), chairman of the Bank of Taiwan (台銀), also expressed concern that current law-enforcement policies are too loose to deter potential perpetrators from committing financial crimes.

A major theme at yesterday's seminar was the topic of how to accelerate the handling of the nation's NPLs was heatedly debated, citing experiences from the US, Japan and Southe Korea.

According to panelists, the US established the Resolution Trust Corp (RTC) in 1989 to dispose of a total failed assets totalling US$402.5 billion at a cost to the public of US$87.5 billion over seven years.

The South Korean government established a Financial Supervisory Commission in 1998, allocating a total of 150.6 trillion won (US$123.5 billion at today's exchange rate), as of March 2001, in public funds to tackle its NPL problem at 487 domestic financial institutions, which at its peak hit 104 trillion won (US$85.3 billion at today's exchange rate).

Meanwhile, the Korea Asset Management Corp (KAMCO) -- the South Korean equivalent of an RTC -- spent 33.6 trillion won (US$27.6 billion) to buy 82.9 trillion won (US$68 billion) in bad loans.

In Japan, a financial crisis fund was established last year. It was armed with ?15 trillion (US$122.6 billion at today's rate) to deal with ?54 trillion (US$441.4 billion at today's rate) in bad loans. In addition to the bank recapitalization policy, Japan also accelerated the auction of NPLs to within a three-year time-frame.

Chen concluded that Taiwan should study South Korea's policies of tackling NPLs, although he warned that some problem areas should be noted. As an example, he cited cash-strapped South Korean banks that have to charge exorbitant interest rates as high as 66 percent.

He also said that Taiwan should think twice about the establishment of financial holding companies. In South Korea, the government has learned that mega-business conglomerates -- often too diversified -- later need government intervention to rescue them, costing the taxpayers even more money.