In its first year in power, the Ministry of Finance under the DPP-led government has done a poor job of handling the nation's financial affairs, academics say.
From bank reform to tax issues to intervention in the stock market, the ministry and the DPP could do no right.
"The first major mistake Yen made was intervening in the stock market," said Norman Yin (
Yin noted that the National Stabilization Fund spent roughly NT$200 billion over the past year as part of an effort to support shares, while the four government-related labor insurance and pension funds spent roughly NT$300 billion. Together, the funds are sitting on paper losses of roughly NT$150 billion, and there's no clear indication when the government will be able to recover its investment.
The finance minister's second mistake, Yin said, was pressuring banks to roll over loans to companies experiencing financial troubles. "The consequence: Banks have halted issuing new loans," Yin said, and that's hurting companies in need of credit to expand their business.
"During the KMT era, the finance ministry took similar actions. But they had restricted the rollovers to a limited number of conglomerates only," Yin said. "The DPP, on the other hand, did it comprehensively."
According to disclosure statements released by the finance ministry, banks have provided rollovers on an estimated NT$200 billion in loans.
Yin said that Yen's continuation of the KMT's high-pressure tactics would do little to address problems in the banking industry and would only make matters worse. "Not only does the problem of overdue loans go unresolved, it also creates a credit crunch for local businesses," he said.
Age: 53
Place of Birth: Taiwan
Experience: Bachelor's degree in law, National Taiwan University; Master's degree in political science, National Taiwan University; Master's degree in law, University of Michigan; Twenty years government experience; 15 years in the finance ministry.
Successes: Several financial reforms, including the drafting of the bank merger law.
Failures: Stock market intervention left government with NT$150 billion in paper losses.
Grade: C-
The banking professor also took issue with the government's efforts to tackle the nation's bad loan problem. Specifically, he said efforts to establish asset management corporations (AMCs) and a US-style Resolution Trust Corp were on the right track, but the measures alone are not enough.
"The scale of the Resolution Trust Corp is too small," Yin said, noting that it would only be capitalized at NT$50 billion. The nation's bad loans, by comparison, are estimated to be more than NT$1 trillion.
As for AMCs, it's unclear whether there will be enough buyers in the market who are interested in purchasing distressed properties.
Yin also criticized the government's efforts to promote mergers in the banking industry, which he said was the right move but for the wrong reason.
"The purpose of mergers is to eliminate redundancy by laying off extra manpower," Yin said. Instead, what's happening is that stronger banks are being paired with weaker banks with high overdue loans.
And what's the point of having mergers in the banking industry if there aren't going to be any layoffs, Yin asked. For example, Yen has promised that the three-way tie up between state-owned banks the Bank of Taiwan (
Tseng Chu-wei
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