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Lin warns banks face risks for failing to merge

Minister of Finance Lin Chuan (林全) says banking and monetary institutions, including farmers' and fishermen's associations, will have to assume all operational risks on their own after the Financial Restructuring Fund, a similar mechanism to the US Resolution Trust Co in the 1980s, ends its operations if they refuse to be consolidated.

Lin made the remarks yesterday in a keynote speech on the outlook of the nation's financial and monetary reforms at a seminar sponsored by the Taiwan Academy of Banking and Finance.

Lin stated that the financial restructuring fund will pay for all losses incurred by such institutions due to bankruptcies, closures, mergers and consolidations only for a specific period, after which, the institutions will have to bear the risk alone.

Lin also noted that the cash-strapped credit units of farmers' and fishermen's associations will also have to follow the game plan.

Lin said the ministry will give the ailing grassroots financial associations time to consider, and if they accept mergers with other financial institutions, they will be subsidized by the restructuring fund.

Lin emphasized that the ministry will work out complementary measures to help reform the farmers' and fishermen's associations.

According to Lin, the net profit ratio posted by domestic banks has dropped drastically, from 12.2 percent in 1995 to 3.61 percent in 2001.

Meanwhile, a proposal by the ministry to increase the funding of the restructuring fund to NT$1.05 trillion is still pending.
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