The DPP administration should stick to its guns and follow through on plans previously hammered out by the Ministry of Finance (MOF) to reform ailing credit units of farmers' and fishermen's associations, pundits said yesterday.
"If the high non-performing loan (NPL) problem of grassroots financial institutions is not solved immediately, the heavy burden will be shouldered by the public later," said Lai Shyh-bao (
TAIPEI TIMES FILE PHOTO
"That financial tab is not small change," he said.
"Credit units are losing NT$100 million every three days," Premier Yu Shyi-kun told the legislature in late September while defending the financial reform policies formulated by his Cabinet.
The MOF's three-tier risk-control mechanism, which was implemented in early September to strictly regulate credit units' lending policies, seeks to eliminate the creation of new NPLs and prevent moral hazard.
"Finance Minister Lee Yung-san (
In response to the president's 180-degree policy reversal, local media yesterday speculated that Lee may resign to show his dissatisfaction. After keeping a low profile yesterday, Lee met with the premier in the afternoon and later shrugged off the speculation.
"I am a little bit upset since our policies were vetoed. But financial reforms have not been abandoned, just temporarily suspended to garner more support," Lee told reporters late in the evening.
Sharing a similar view, Cheng Chen-mount (
"The biggest problem with grassroots institutions is the risk of moral hazard. Even if the government injects money now to help write off credit units' bad loans, their current business practices can't guarantee that there won't be any new bad loans," Cheng said.
Cheng added that the government should help expand the units' market niche to insure their health and maintain their survival.
Chen Chung-hsing (陳松興), president and CEO of the Taiwan Ratings Corp (中華信評), however, yesterday downplayed the importance of financial reforms on grassroots credit units, saying "this is just a minor setback to the administration's financial reforms since credit units' assets value is less than 10 percent of the whole financial sector's total assets."
"It has become a highly sensitive political issue which has taught the MOF a lesson in crisis management before it plans to thoroughly implement reforms on commercial banks," Chen said, stressing the importance of communications between the government and the private sector.
Expressing his endorsement for the president's temporary suspension of grassroots financial reforms, Huang Da-yeh (黃達業), a professor of finance at National Taiwan University, yesterday further called the MOF's policies problematic.
He said that "the MOF's mechanism has seriously threatened the credit units' survival, yet failed to offer a buffer to adjust themselves to the new rules, which led to the policy's failure."
Huang, however, disagreed with the Cabinet's new proposal to authorize the Council of Agriculture (COA,
"It'll be a big mistake," Huang said.
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