The Financial Supervisory Commission yesterday announced it would extend the deadline for its blanket deposit guarantee to the end of next year in a bid to stabilize the domestic financial markets.
“The commission has reached a consensus with the finance ministry and the central bank on the policy’s extension upon final approval from the Cabinet,” Hsiao Chang-jui (蕭長瑞), deputy director-general of the commission’s banking bureau, told a media briefing.
On Sept. 18, Premier Wu Den-yih (吳敦義) said the government would extend the full guarantee on bank deposits for one year to the end of next year.
The policy, which was brought in by former premier Liu Chao-shiuan (劉兆玄) last October, took effect on Nov. 1 and was to expire at the end of this year.
Hsiao said the policy extension was finalized because it has proven effective in easing panic among depositors and prevented bank runs.
Taiwan also aims to stay in sync with neighboring economies such as Singapore and Hong Kong, where deposit guarantee policies also end next year, he said.
As a supporting measure, the commission said that it would strengthen its oversight on the banking sector to avoid any potential moral hazards, while continuing to keep tabs on ill-performing banks.
The commission will immediately order banks that fail to meet its required 8 percent Bank for International Settlements (BIS) ratio to raise capital, he said. The BIS ratio is often used to measure a bank’s financial strength.
“By law, the commission is entitled to shut down any banks whose BIS ratio falls below 2 percent,” Hsiao said.
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