Sat, May 17, 2003 - Page 10 News List

MOF urges speedy bank bailout

FACILITATION OF REFORM Lawmakers have given their preliminary approval to the ministry's clean-up plan, but they have cut the requested budget by around one-third

By Joyce Huang  /  STAFF REPORTER

Minister of Finance Lin Chuan (林全) yesterday urged the legislature to accelerate passage of a draft bill, allowing the ministry to expand the size of Financial Restructuring Fund (金融重建基金) to NT$680 billion from the current NT$140 billion.

Lin asked lawmakers to speed up passage of the bill by the end of next month so as to facilitate the government's financial reform.

"The NT$140 billion fund will be used up if the government's plan to auction off Kaohsiung Business Bank (高雄企銀) in June works out," Lin said yesterday morning at a press conference.

After spending NT$100 billion on the bailout of 36 grassroots credit units last year, Lin said that the remaining NT$40 billion in the fund is not enough to bail out both financially distressed Kaohsiung Business Bank and Chung Shing Commercial Bank (中興銀行).

Chung Shing is expected to cost the government over NT$80 billion after three failed auctions last year.

Lin made the comment yesterday after lawmakers gave preliminary approval to the ministry's plan to increase the clean-up fund to NT$680 billion from an earlier request of NT$908.6 billion.

The legislation will need to undergo two more readings before being finalized.

The government plans to use the restructuring fund to bail out finan-cially distressed banks, reduce the nation's non-performing loan (NPL) ratio and help ill-performing banks to return to financial health. Its goal is 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.

But during a session on Thursday, the legislature's Finance Committee nixed the ministry's proposal to allocate public funds to buy the preferred shares issued by troubled financial institutions.

In early March, the ministry revised the fund's budget from NT$1.05 trillion 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.

According the ministry, another NT$150 billion would be required to inject capital into banks whose capital adequacy ratio is lower than 8 percent in return for preferred stocks in the banks.

Gary Tseng (曾國烈), director general of the ministry's Bureau of Monetary Affairs, reportedly said on Thursday that the cash-strapped ministry would then appropriate NT$310 billion to bail out failed banks and NT$270 billion to buy their bad loans if only NT$680 billion is approved.

As of the end of March, the nation's NPL ratio fell to 8.6 percent, or NT$1.2 trillion (US$35 billion), from 8.85 percent at the end of last year after aggressive write-offs of bad loans by domestic banks last year.

Given the government's financial difficulties, Hsu Chen-ming (許振明), an economics professor at National Taiwan University, yesterday expressed his satisfaction with the legislative approval to increase the fund to some NT$680 billion.

"It's good enough," said Hsu, who also sits on the ministry's financial reform committee. "It's the second best size [the government can get] in light of the worsening economic situation."

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