MOF denies `illegal' debt relief

The Ministry of Finance (MOF) yesterday flatly rejected a legislative report which ruled that the government's taking over of 36 credit units from grassroots financial institutions was "unconstitutional."

"Standing on the existing legal footing, the ministry has followed all due process to bail out debt-ridden community-level financial institutions," Huang Tien-mu (黃天牧), deputy director-general of the ministry's Bureau of Monetary Affairs, told a press conference yesterday.

Huang called the legislature's report "groundless and biased."

In August, 2001, the ministry instructed the Central Deposit Insurance Corp (中央存保) to take over 36 grassroots cooperatives located mainly in central and southern Taiwan. They were later merged into several state-owned banks, such as the Hua Nan Bank (華南銀行) and the Chang Hwa Commercial Bank (彰化銀行).

While the takeover of these grassroots financial institutions was part of the government's move to clean up the nation's financial sector, opposition parties has since then asked the government to return 36 grassroots credit units to farmers and fishermen's associations. They also considered petitioning the Council of Grand Justices to rule on the legality of the resolutions.

On Monday, the 21-member legislative committee, chaired by KMT Legislator Liu Cheng-hung (劉政鴻), finalized a draft report in which it accused the finance ministry of failing to notify concerned members from credit cooperatives in writing before the takeover in 2001 and 2002.

"The government's coercive move had seriously infringed people's property rights," the report said, citing the 10th article of the Constitution.

The report also said that the government had auctioned off the cooperatives' assets at a very low price.

In response, Huang yesterday said that the auction was based on a professional appraisal conducted by five local accounting firms, insisting that the legislature's appraisal was only based on partial assets with good quality.

Huang also said that, before the takeover, the government had given a grace period for cooperative officials to improve their deteriorating financial conditions, but most of the management teams said they were incapable of turning performance around.

Huang said that the legislature had wrongly cited the constitutional article, which has been considered outdated after revisions to the Merger Law and the Bank Law were made.

When asked if cooperatives would be allowed to buy back their auctioned assets, Huang said that the decision rests with the Council of Agriculture, which is now the financial regulator for credit units of fishermen's and farmers' associations.

After the ministry's denial yesterday, the legislature will be entitled to seek a final ruling from the Council of Grand Justices to resolve the dispute.