The market share of grassroots financial institutions declined significantly over the last four years, while their market share in the retail loan market has declined from 8.6 percent to 3.4 percent in the same period, according to statistics released by the Directorate General of Budget Accounting and Statistics (DGBAS) yesterday.
Grassroots banks' market share of deposits has also declined from 13.8 percent to 5.2 percent.
Pundits said several factors contributed to the phenomenon.
"After a number of bank runs at grassroots financial institutions over the last few years, depositors have moved their money into postal savings," Lee Tong-how (李桐豪), a finance professor at National Chengchi University, told the Taipei Times yesterday.
"Another major reason is that, through merger activities, quite a few grassroots institutions have become part of the banking system, and many of them are relatively large grassroots institutions. The administration took over 36 problematic credit cooperatives in the past few months, making the sector smaller," said Lee.
DGBAS said there were 1,778 grassroots financial institutions, including branches, at the end of 2000, 174 outlets less than 1996. Total assets of the institutions totalled NT$2.5 trillion at the end of last year, down 24.8 percent from 1996.
The total non-performing loan ratio of grassroots institutions was 15.7 percent at the end of last year, or 8.6 percentage points higher than the end of 1996.
Total non-performing loans hit NT$204.2 billion at the end of last year, DGBAS said.
In the same period, the average non-performing loan ratio of all credit cooperatives rose from 6.1 percent to 8.7 percent, while the non-performing loan ratio of all farmers' associations' credit departments rose from 8.2 percent to 17.9 percent in the same period. Both have doubled over the past four years.
DGBAS said it was partly caused by competition brought by new commercial banks.
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