Insurance Act
. The bill completed the third reading in the Legislative Yuan on December 24,
1984, andwaspromulgatedand implementedbypresidential decreeonJanuary9, 1985, setting
the stage for thebirthof Taiwan'sdeposit insurance system.
At the start of 1985, Taiwan experienced a chain of bank runs affecting the Tenth Credit
Cooperative of Taipei City, Cathay Trust and Investment Corporation, Asia Trust and Investment
Corporation, andOverseas Chinese Trust and Investment Corporation. These crises highlighted
theurgencyof establishing adeposit insurance system. TheMOF, in conjunctionwith theCentral
Bank, therefore organized and funded the establishment of the CDIC following promulgation
of
the Deposit Insurance Act
. The CDIC officially began operations on September 27, 1985,
becomingTaiwan's sole institution in chargeof deposit insurance.
(2) OverviewofMajorDuties
A. PromotingDeposit Insuranceunder theVoluntary System
Taiwan's deposit insurance systemwas founded as a voluntary system. Themain intentionwas to
give financial institutions freedom of choice, consistent with the trend of financial liberalization.
It also allowed the CDIC to retain underwriting power. As a new system, the deposit insurance
scheme was largely unknown to the general public. Moreover, financial institutions took a wait-
and-see attitude onwhether or not to join the system,making it harder for theCDIC topromote
the system thanhadbeen initiallyanticipated.
The CDIC therefore established a team to promote the deposit insurance system. The team
was dispatched to hold seminars at financial institutions throughout Taiwan, attend work
meetings of financial institutions to introduce the deposit insurance system, and communicate
with responsible parties at financial institutions.With the assistance of the then Department of
Financial Affairs under the Taiwan Provincial Government, the finance departments of cities and
countieswere invited toattend seminars introducing thepolicy implicationsof deposit insurance.
These agencies were also encouraged to help local financial institutions under their jurisdictions
toparticipate in thedeposit insurance scheme.At the same time, theCDICdecreasedpremiums
and raised the maximum coverage in 1987 and 1988. These efforts and measures finally
succeeded in increasing the number of insured institutions from eight initially to 141by the end
of 1988.
Looking back over the process of expanding deposit insurance operations, it is clear that the
success in prompting private financial institutions to join the deposit insurance scheme hinged
on winning participation by the five state-owned banks, which in turn was achieved by actively
communicating with and gaining support from the persons in charge at these banks, related
competent authorities, and legislators. Nevertheless, the eight banks under theTaiwanProvincial
20
Central Deposit Insurance Corporation 30Years inRetrospect
