Financial experts ponder NPLs

Before injecting public money to clean up the nation's bad loans, the government should create a mechanism to help ailing corporations restructure their non-performing loans (NPLs), banking experts said yesterday.

"An independent revitalization committee composed of prominent business leaders from the private sector should be set up to assess the quality of [corporate] impaired assets and decide whether the government's Financial Restructuring Fund (金融重建基金) should spend [taxpayers'] money on reducing bad loans," Joseph Lee (李存修), a finance professor from National Taiwan University, said at a seminar yesterday.

The seminar, entitled Financial Reforms and the Outlook for the Financial Market, was put on by the National Policy Foundation yesterday to discuss the DPP administration's banking policies.

Lee pointed to a seven-member revitalization committee created by Japanese Prime Minister Junichiro Koizumi in September as an example. The committee invited business leaders such as the chairmen of Toyota and Sony to give advice on failing corporations' financial management.

"The committee will help corporations which are still financially viable get back on their feet and pay back debts so that the government doesn't have to spend big on their bad loans," Lee said.

Taking advantage of the expertise of its members, the committee will also evaluate non-performing corporate loans and advise the government when it's time to move in.

Endorsing Lee's proposal, Hsu Chen-min (許振明), an economics professor also at National Taiwan University, said that the mechanism could prevent sudden business closures and avoid the unemployment problems that follow.

He said that a legal footing, such as the passage of a bankruptcy law, should be provided to empower the committee's operation.

Former finance minister Paul Chiu (邱正雄) also stressed the importance of corporate restructuring, saying 30 percent to 40 percent of NPLs in the US were actually re-sold to their original debtors.

In response, Vice Minister of Finance Susan Chang (張秀蓮) said that the government has no plans to incorporate such a mechanism into the financial restructuring fund to solve the nation's bad-loan problem.

But the vice minister didn't rule out the possibility of considering the proposal in the future.

Chang said the government has already established regulations to monitor banks' performances.

Currently, the government requires financial institutions to maintain a minimum 8 percent capital adequacy ratio.

A capital adequacy ratio is a measure of a bank's health.

Meanwhile, Chang called for immediate legislative approval of NT$1.05 trillion for the government's financial restructuring fund.

She also urged the establishment of a Financial Supervisory Board (金監會) to regulate the operations of 14 emerging financial holding companies.