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Ministry eyes farm-bank stake

Minister of Finance Lee Yung-san (李庸三) said yesterday that the government will support an initiative taken by grassroots financial institutions to jointly form a national agricultural bank.

"If necessary, the government might put down a small investment in the yet-to-be-formed agricultural bank, buying less than 10 percent of its shares," Lee told reporters.

Lee reiterated that his ministry's three-tier control mechanism, announced earlier this month, was not intended to "wipe out grassroots financial institutions. Instead we want to help them return to health."

When asked whether the ministry would cave into pressure and delay the mechanism's implementation, as local Chinese-language media had speculated, Lee insisted that his ministry had no plan to do so.

The ministry announced tougher rules earlier this month to regulate lending by credit units of farmers' and fishermen's associations.

Representatives from the troubled credit units immediately protested the moves.

Later last week, former president Lee Teng-hui (李登輝) and the TSU also spoke out against the ministry's proposal. They severely lambasted the government's financial policymakers for "not using their brains."

Lee said that due to the sluggish economy, the agriculture sector was one of the few of Taiwan's industries that could offer jobs to unemployed people, which he said was very important to Taiwan's future economic development.

Lee -- formerly an agricultural economist -- urged the establishment of a national agricultural bank to bail out the nation's debt-ridden grassroots financial institutions.

The KMT legislative caucus on Thursday condemned the ministry's new rules, saying they would join forces with the associations and stage "any necessary struggle" against the ministry.

In response to the opposition, Cabinet Secretary General Liu Shih-fang (劉世芳) said the government would stick to its guns and carry out the measures as planned.

She said that the ratio of non-performing loans (NPL) among credit cooperatives is now so high that they pose a threat to the nation's financial health. "They are like a time bomb," she said.

Liu said that the DPP legislative caucus would fully support the ministry's measures.

According to Liu, more than 100 credit cooperatives in Taiwan have an NPL ratio of more than 25 percent, a total of NT$88.7 billion in bad loans. Seventy-six credit cooperatives have an NPL ratio of between 15 percent and 25 percent, worth NT$35 billion. Another 65 credit cooperatives have less than 10 percent in bad loans, worth NT$8.4 billion.

To ease the developing political tensions among the ruling and opposition parties, Lee Yung-san said yesterday that he will hold talks with former president Lee and the KMT's legislative caucus to seek their understanding and support.

The minister also said the new measures only put limitations on loans to friends and relatives of credit union officials.

Citing statistics from the past five years, the minister said that "the more the nation's credit cooperatives have lent to internal borrowers, the higher their NPL ratio is."

He said that the new measures put no limitations on farmers' demands for loans.
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