Finance officials raided and took supervisory control of about 13 to 14 troubled grass-roots financial institutions yesterday, the central bank said.
The raid -- conducted by a task force under the Central Depository Insurance Co -- included officials from the legal, computer information and lending departments of several state-run banks.
News of the move was inadvertently leaked by a central bank official yesterday morning, who thought the plan was common knowledge.
"Several inspection officers of the central bank and staff from the finance ministry, the Central Depository Insurance Co and eight banks have been dispatched," said Fred Chen (
Chen said the bank officials were dispatched to southern Taiwan to begin supervision of roughly 13 financial institutions.
Chen told reporters yesterday that the targeted financial institutions were operating with a negative net worth. The bank official said the heads of the 13 companies had agreed to relinquish management control to the government.
Chen added that yesterday's move was the first step by authorities to clean up debt-ridden grassroots financial institutions.
The government has targeted the credit cooperatives of 36 farmers' and fishermen's associations operating with a negative net worth.
Scrambling to explain the situation, the finance ministry called an impromptu press conference for 4:30pm, only to later cancel the meeting. Instead, the ministry released a short statement.
The purpose of the move, according to the statement, was to "fully understand the financial and business conditions of these institutions." The ministry also said that it would attempt to avoid an interruption of services provided by the problematic financial institutions and said no closures would occur.
The ministry also sought to discourage any possible bank runs on Monday when the businesses reopen by saying no one would lose their deposits.
"Regardless of the amount each depositor has saved in these financial institutions, the financial reconstruction fund will fully cover all deposits," the statement said.
In June, the legislature approved the formation of a NT$140 billion financial reconstruction fund, a bank clean-up fund that is intended to operate along the lines of the Resolution Trust Corp in the US.
Overdue loan ratios at domestic grass-root financial institutions is estimated at 17 percent, with bad loans totaling some NT$210 billion.
The central bank said yesterday that the average non-performing loan ratio rose to a record high of 6.47 percent at the end of June, up from 5.05 a year earlier.
The ratio, which measures NPLs against total loans, was higher than 5.89 percent at the end of March, the bank said in a statement. Total NPLs stood at NT$929.1 billion (US$26.8 billion) against total loans of NT$14.36 trillion at the end of June.
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