Government officials meet with bankers

Premier Yu Shyi-kun yesterday held talks with leaders of the nation's top 25 banks, urging them to support the government's financial policies and reforms.

Summarizing his six-point plan, Yu said that he expects the banking sector to further consolidate through mergers and acquisitions and to act on the president's call for financial reforms by reducing the non-performing loan ratio to below 5 percent while increasing banks' capital adequacy ratio to above 8 percent within two years.

"The over-banking problem has created vicious competition. This is threatening their survival," Yu said.

The premier also urged banks to support the Cabinet's long-term National Economic Development Project, which will spend NT$2.6 trillion within the next six years on the nation's economic development, and the establishment of a NT$1 trillion fund to help revive the nation's traditional industries.

Expressing his concern over the recent decline in local investments, Yu said that his administration has come up with measures to stimulate investment and boost economic confidence, adding that "the economic spring will soon arrive."

Yu also asked for relaxation of the credit crunch on enterprises, encouraging banks to not cut back on the supply of capital to well performing enterprises during the current economic slowdown. He also cautioned banks against lending to risky China-bound investments, which may later turn sour and leave their debts behind in Taiwan.

Bank executives at yesterday's closed-door meeting included Chen Mu-tsai (陳木在), chairman of the Bank of Taiwan (台銀), Wei Chi-lin (魏啟林), chairman of the Land Bank of Taiwan, Liu Tai-ying (劉泰英), chairman of China Development Financial Holding Co (中華開發金控) and Lin Tzong-yeong (林宗勇), chairman of International Commercial Bank of China (ICBC, 國際商銀) while Vice Premier Lin Hsin-yi (林信義), Minister of Finance Lee Yung-san (李庸三) and high-ranking finance officials also sat in on the meeting.

Gary Tseng (曾國烈), director general of the finance ministry's Bureau of Monetary Affairs, said after the meeting that most participants endorsed the government's determination to implement financial reforms, although some of them expressed concerns over the banking sector's overall health.

According to Bank of Taiwan's Chen, bank profits have fallen as competition narrows the gap between interest paid to savings depositors and that earned from borrowers declines.

China Development's Liu said that the economic downturn has spelled hardship for banks, while Land Bank's Wei expressed his concern over the finance ministry's new rules on grassroots financial institutions, according to Huang Chun-chung (黃春鐘), chairman of Union Bank of Taiwan (聯邦銀行), who spoke to the Taipei Times after the closed-door meeting.

Minister Lee said the finance ministry will conduct thorough studies to address the banking sector's concerns. He urged banks to focus on corporate finance in addition to a recent boom in consumer financing, Tseng said.