CDIC to raise deposit-insurance premiums.

Taipei, September 24, 2009 (CENS) -- Beginning from January 2010, the Central Deposit Insurance Corporation (CDIC) will raise deposit insurance premium rates with such rate applicable to deposits exceeding the government-guaranteed NT$1.5 million (US$46,296 at US$1:NT$32.4) to rise from the present 0.0025% to 0.005%, which is expected to seriously impact foreign banks.

Regarding the CDIC's move, some foreign banks said the adoption of the fixed deposit insurance rates is inappropriate, saying the rates should vary according to the risk level of insured banks.

The CDIC is currently suffering a shortfall of NT$60 billion (US$1.85 billion) in reserve funds. After managing the defunct Chin Fon Bank, the shortfall amount could rise to NT$100 billion (US$3.08 billion). To help ease the CDIC's financial situation, the Ministry of Finance has asked the Cabinet-level Financial Supervisory Commission to let CDIC raise deposit insurance premium rate so that it can enhance financial structure.

CDIC's reserve funds mainly come from business taxes handed over by banks and deposit insurance premiums. With some NT$20 billion (US$617.28 million) collected in revenues from bank business taxes, CDIC does not have enough to protect depositors of failed banks.

Under the current mechanism, the CDIC sees revenues from deposit insurance premiums reach NT$4.5 billion (US$138.88 million) per year and the amount will rise to NT$9 billion (US$277.77 million) if a fixed-rate mechanism is adopted. But it is very difficult for the CDIC to adopt the fixed-rate mechanism due to objections from banks.

((BS)) (GE)