C. ProvidingGuidance and Superintendence of Problem Insured Institutions
In1995, fraudby high-level executives at theChanghua FourthCredit Cooperative sparked local
bank runs and created systemic risk. In order to stabilize the operations of insured institutions
and prevent moral hazard, the CDIC was successively assigned to provide guidance and
superintendence at insured institutions with business problems. This was achievedmainly by
attending themeetings of the institution’s board of directors or managing board and guidance
meetings convenedby the competent authority.When serious financial or business deficiencies
were found, the CDIC actively urged the institution to formulate improvements to return their
operations to normal. The CDICmay also, when deemed appropriate, suggested that the
competent authority adopted other necessary legal measures, such as effecting independent
mergers or general assumption. Over the years, the CDIC has provided guidance to 61 insured
institutions and superintendence to seven institutions. In all cases, depositor rights and interests
wereprotectedas a result.
(5) Handling of Unsound Financial Institutions under Commission of the Executive Yuan’s
Financial RestructuringFund
A. Establishing andOperating the FundManagement Committee
In order to handle potential problems at community financial institutions and the rising non-
performing loan (NPL) ratioof banks, theROCgovernment decided to finance theestablishment
of the Financial Restructuring Fund. The Financial Restructuring Fund provided a blanket
guarantee for depositors and enabledmismanaged financial institutions to gently and smoothly
withdraw from themarket, making the financial storm disappear. On July 9, 2001, the
Financial
Restructuring Fund
Statute was enacted and the Financial Restructuring Fund was established.
On July 16, 2001, the Financial Restructuring Fund Management Committee (hereinafter
referred to as the “FundManagement Committee ") was established and placed in charge of
reviewing decisions related to handlingmechanisms and supportingmeasures. In June 2005,
the committee established an Evaluation Subcommittee in charge of auditing asset valuations.
Implementationof thedecisions reachedby theFundManagement Committeewas entrusted to
theCDIC.
B. Financial Resources and FundingAccommodation for the Financial Restructuring Fund
The Financial Restructuring Fund Statute stipulates that, if financial industry business tax revenue
and deposit insurance premium income are insufficient to cover payouts, the Fundmay entrust
the CDIC to borrow from financial institutions, as well as use statutory funding sources for
repayment.
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ReviewandOutlook
