Bankers Association May Resume Bailout Program for Enterprises

Taipei, Dec. 7, 2011 (CENS)--In the face of the impact of European-debt crisis on the domestic economy, Bankers Association ROC resolved yesterday (Dec. 6) to conditionally resume the bailout mechanism for enterprises and relax the regulation on the margin call for mortgaged stocks.

The proposal will be put forth at the meeting of the association's board of directors and supervisors for approval on December 22 before being submitted to the Financial Supervisory Commission (FSC) for ratification. It is scheduled to take effect by the end of this year.

The bailout system will pattern after a similar system adopted during the global financial tsunami in 2008. It will consist of two elements. First, enterprises with normal operation and interest payment can apply for extension of their loans upon the maturity of their loans and banks will agree to extend the payment deadline by half a year.

Second, enterprises needing greater extent of relief can ask from support by the Ministry of Economic Affairs, which will then pass the cases to Bankers Association. Subsequently, the largest creditor bank will convene a meeting with other creditor banks for discussing bailout methods and the conclusions must be complied by all creditor banks, so long as they are approved by two thirds of the creditor banks.

Meanwhile, in the past so long stock prices drop by 30%, banks would directly sell the mortgaged stocks in their possession. Under the proposed practice, banks must consult with customers for lenient treatment or the provision of extra collaterals, to avoid affecting the normal operations of enterprises.

Taiex index closed under the 7,000-point mark yesterday, with trading volume reaching only 66.7 billion, compared with 61.2 billion on Monday, which is 33-month low. The continuous decline of the index and contraction of trading volume has alarmed the national security fund, which is watching closely the market development to decide the timing for its intervention.