The Ministry of Finance has ordered the Central Deposit Insurance Corp (CDIC, 中央存保公司) to take over seven grassroots financial institutions as part of the most recent government move to clean up the financial sector, Minister of Finance Lee Yung-san (李庸三) said at a press conference yesterday.
Yesterday's action is the second government-led takeover of a group of troubled farmers' and fishermens' cooperatives in less than a year.
In late May, the CDIC seized the financially distressed Fifth Credit Cooperative of Tainan (台南五信).
The seven cooperatives -- located in Taichung, Tainan, Kaohsiung and Pingtung, as well as two in Changhwa -- all reported a negative net worth, Lee said.
"Their liabilities exceeded their combined asset value of NT$28 billion," he said.
Lee said the takeovers were necessary because the ministry, after closely monitoring the seven cooperatives for about six months, discovered that they were nearing bankruptcy.
To reassure the public, the government will assume responsibility for the cooperatives by utilizing the NT$140-billion Financial Restructuring Fund (金融重建基金), Lee said. The fund was approved by the legislature in June of last year in order to help clean-up troubled and corrupt financial institutions.
"After the takeover, operations at the cooperatives will remain normal as the government protects the interests of depositors. There will be no losses," Lee said, urging the public not to rush to withdraw their money from the cooperatives. The institutions are slated to reopen for business on Monday.
In August of last year, the ministry instructed the CDIC to take over 36 grassroots cooperatives located mainly in central and southern Taiwan, and later proceeded to merge them 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).
The ministry has spent over NT$70 billion of the original NT$140-billion fund to clean up the 36 failed institutions last year, leaving it with some NT$60 billion to deal with the latest seizure.
Lee reiterated that the ministry would ask the legislature increase the fund to NT$600 billion.
Lee said, that two state-run banks are evaluating the feasibility of absorbing the cooperatives seized yesterday, but he declining to specify the banks.
Earlier yesterday, local newspapers speculated that three state-run banks -- the Land Bank of Taiwan (土地銀行), the Farmers' Bank of China (農民銀行) and the Taiwan Cooperative Bank (合作金庫) -- would be asked by the ministry to absorb the seven grassroots lenders.
As the financial sector still faces mounting non-performing loans -- reportedly NT$1.68 trillion in total at the end of March -- the ministry would not rule out another wave of seizures at troubled lenders, Lee said.
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