5. Resolutionof ProblemFinancial Institutions
(1) From the Establishment of Deposit Insurance to before the Establishment of
theFinancial RestructuringFund
Before July 2001, there were only sporadic cases of business crisis at insured
institutions inTaiwan.Theproblems that didarisewere related to improper loansor
fraudbypersons in charge at individual institutions. In these cases, theMOF, as the
competent authority at the time, instructed the CDIC to provide legallymandated
on-site guidance, assist in quelling bank runs, provide financial assistance,
and provide on-site superintendence or conservatorship to achieve the policy
objectivesof stabilizingdepositor confidenceandhelping insured institutionsmeet
liquidityneeds.
Many of the failed institutions coming under superintendence or conservatorship
during this period were ultimately merged or acquired through friendly
takeovers by sound insured institutions. For example, the Hsinchu Second Credit
Cooperative, which came under superintendence in September 1996, was
assumed by the Macoto Bank (nowmerged as the Shin Kong Bank) in January
1997; and the Kaohsiung Fifth and Tenth Credit Cooperatives, which came under
superintendence in June 1997, were assumed, respectively, by the BanqiaoCredit
Cooperative (reorganized as the Bank of Panhsin) in September 1997 and the Pan
Asia Bank inOctober 1997. However, theDonggangTownshipCredit Cooperative
of PingtungCounty, which cameunder conservatorship in July 1999, was assumed
by the Bank of Taiwan in September that year, with the CDICmaking payouts to
makeup theasset-liabilitygap.
In some cases, the operating conditions at the insured institutions steadily
improved following the replacement of executives and business reorganization,
enabling the institution to continue operatingwithout changing its original name.
One example is Taichung Commercial Bank, which came under superintendence
in1998. Inother cases, the institutiondivested its financial business unit to another
sound insured institution after comingunder superintendence.Oneexample is the
TaiwanDevelopment andTrustCorporation,which cameunder superintendence in
2000and sold its trust department to theJihSun International Bank in2005.
(2) Financial RestructuringFundPeriod
The repercussions of the Asian financial crisis in 1997 spread to some financially
weakmajor enterprises in Taiwan and began to affect Taiwan’s stockmarket. This
led to the “land-mine stock” crisis in the second half of 1998 and had a fallout
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ReviewandOutlook
