KMT legislator Chu Li-rin (
The plan was deemed acceptable by Vice Minister of Finance Sean Chen (陳沖), who said at the Legislative Yuan yesterday that NT$140 billion should be sufficient capital to absorb actual losses at troubled domestic banks.
According to the KMT proposal, NT$20 billion would be generated from increased rates charged to banks for backing from the Central Depository Insurance Co (CDIC,
The other NT$120 billion would come from business tax revenues from the financial services sector over the next four years.
Chu floated the RTC proposal during a CDIC regulation review meeting held at the Legislative Yuan yesterday.
"This [KMT's] version is expected to pass in mid-April, and will start operation in July," Chu said yesterday at the Legislative Yuan.
According to KMT's proposal, an RTC mechanism would be enacted with a single law and operate for a period of five years. After the RTC is dissolved, any problematic financial institutions would be handled by the CDIC.
Three kinds of problematic financial institutions would be dealt with by the RTC over the next five years, including financial institutions with a negative net worth, problematic banks with serious overdue loan ratios and financial institutions categorized by authorities as problematic.
After the RTC starts operations in July, according to the KMT's plan, it would issue financial bonds totalling NT$140 billion. The bonds would be paid back with tax and premium revenue from the CDIC.
In response to questions by legislators as to whether there would be sufficient capital, the finance ministry's Chen said, "Based on actual losses at domestic financial institutions, NT$140 billion is enough to take care of them. But from the cash flow and liquidity of the RTC, NT$140 billion is still not enough."
Overdue loans for the nation's banking sector are estimated by the finance ministry to total NT$1 trillion.
"The purpose of setting up an RTC would be to dispose of financial institutions with a negative net worth as a priority," Chen said. "It's not aimed at rescuing stock investors or stockholders, but to rescue depositors."
As to how many credit cooperatives currently have a negative net worth, Chen said some 10 percent of grassroot financial institutions are in the red.
"Currently, 15 credit cooperatives have a negative net worth," Chen said.
"However, if we take all overdue loans to be categorized as bad loans, I estimate that there would be about 30 credit cooperatives with a negative net worth, or about 10 percent of a total of 307 credit cooperatives," Chen said.
President Chen Shui-bian (陳水扁) has recently said problematic credit cooperatives should be the first ones to be taken care of when confronting bad and non-performing loans at financial institutions.
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