The Financial Committee of the Legislative Yuan yesterday passed the first reading of the drawn-out amendments to the Resolution Trust Committee Fund Regulatory Provisions (
The restructuring fund, also known as RTC, was established in July 2001 with capital of NT$140 billion. The fund is slated to expire on July 10 and will hand over its clean-up mission to the Central Depositary Insurance Corp (CDIC,
In addition, the problematic banks with a capital adequacy ratio below 2 percent will be asked to improve within three months, said Kong Jaw-sheng (
The relief mechanism would not intervene unless these ill-fated banks failed to improve their financial conditions within the grace period, Kong said.
The amendments will allow the bail-out fund to continue exist for another five years until the end of 2010, in a bid to finish the unresolved restructuring issues like the sale of mortgages, collecting business taxes paid by financial institutions and repay the fund's debts built up during the bail-out process.
"The extension of the fund relieves the shortage of capital of nearly NT$60 billion caused by the drawn-out restructuring process of Chung Shing Bank (
There remaining seven banks that see negative net value and are engaged in the self-help process through measures like raising funds, Kong said, and the RTC's extension can help prevent the potential confidence crisis if some of these banks fail to bail themselves out in the future.
To facilitate the self-help process, the amendments allow problematic banks' non-saving debts taking place within two months after July 10 to be covered by the fund.
Such non-saving debts are estimated to be around NT$7 billion, or 20 percent of these banks' total debts, according to Gary Tseng (
Nevertheless, Chinese Nationalist Party (KMT) Legislator Lee Jih-chu (
Lee advocated compensation only to the creditors that aided the debt-ridden banks by request of the government previously.
Lee also retained her power of objection to the regulation. She is therefore entitled to bring up her disagreement during the second reading of the bill, which may overturn the regulation.
The bill also allows authorities to make public the borrowers of the non-performing loans from indebted banks, if the loan is over NT$1 million.
People First Party Legislator Christina Liu (劉憶如), however, disagreed with the regulation, saying that it violates the banks' confidentiality obligation imposed by the Banking Law (銀行法) and would hurt the nation's small and medium enterprises, which already have difficulty in raising funds.
Meanwhile, the legislators watered down a regulation that terminates the levy of business taxes on financial institutions, the RTC's fund source, at the end of 2010 along with the RTC's expiration.
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