Gov't Nominee for President of Agricultural Bank Rejected

Taipei, Jan. 3, 2008 (CENS)--The board of directors of the National Agricultural Bank rejected to approve nomination by the government of Chen Min-yuan as its president, a move interpreted by insiders as reflection of complaint among farmer groups over the government's agricultural policy.

Chen was nominated to succeed Ting Wei-hao, which has been transferred to be chairman of Bank of Taiwan Life Insurance, under the newly established Taiwan Financial Holding.

The board of directors turned down Chen's nomination by votes of eight against seven, a surprising outcome since government owns five seats and nominated all of the five independent directors on the board. Three independent directors joined the camp of the five seats occupied by chairmen or secretary generals of farmers' associations in voting against the nomination.

The job-transferring ceremony for the presidency was called off and Huang Li-yueh, the bank's chairman, will take over responsibility of the presidency for the time being.

Representatives of farmers' association complained of the government's failure in consulting with them in advance over the candidate for the presidency, saying that they refused to act as a rubber stamp of approval.

Insiders also attributed the rejection to complaints among farmer groups over the government's agricultural policy in recent years, including the need to for farmers to pay higher premiums after incorporation of farmers' insurance into the national pension program, scheduled for inauguration in October this year, as well as low interest rates offered by the bank to deposits made by farmers' association.

The bank was established in 2005, in the wake of outbreak of litany of bank run on credit departments of farmers' association. Forty nine percent of its paid-in capital of NT$20 billion comes from the government, with the remainder from farmers' associations. It now boasts NT$400 billion of deposits, 99% of which come from time deposits of farmers' association, much higher than 40% share of time deposits at local commercial banks, greatly boosting cost of its funds. It has been impeded by limited number of branches in expanding lending business. In 2007, it incurred considerable loss from investing in fixed-yield products, due to the U.S. subprime housing loan crisis.