Minister of Finance Lin Chuan (
The government plans to use the restructuring fund to bail out financially distressed banks, reduce the nation's non-performing loan (NPL) ratio and help ill-performing banks to return to good financial health.
Many legislators questioned how the fund would be managed, saying the lack of a proper monitoring mechanism at the Ministry of Finance was a problem.
PFP Legislator Thomas Lee (
According to Lee, the bail-out of debt-ridden Chung Shing Bank (
Lee refused to identify the troubled banks, whose assets may soon turn negative and need to be taken over by the government.
PFP Legislator Christina Liu (
A tentative plan by the ministry to bring down the NPL ratio to below 5 percent and the capital adequacy ratio to over 8 percent within two years of new funding approval will result in a "waste of taxpayers' money," Liu said.
She proposed the establishment of an independent asset-evaluation committee to decide which banks should be bailed out and how much should be spent on NPLs. The proposal was endorsed by 115 lawmakers.
Lee and Liu also disagreed with the government's plan to act as an asset management company and buy back NPLs or invest in badly performing banks in return for preferred stocks, saying that "the government should allow market mechanisms to prevail."
In early March, the finance ministry revised the fund's budget to NT$908.6 billion, saying it needed NT$312 billion to bail out failed banks and NT$346.5 billion to absorb defaulted bank loans.
In addition, the ministry plans to allocate another NT$150 billion to inject capital into banks whose capital adequacy ratio is lower than 8 percent in return for preferred stocks in the banks.
Grilled by KMT Legislator Lo Ming-tsai (
But Tseng assured Lo that the assets of these banks haven't turned negative yet.
Despite being lambasted by legislators, Lin, nevertheless, urged the legislature to accelerate the fund's approval.
He said that the longer it takes to pass the law, the more losses troubled banks will incur to the detriment of government coffers.
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