Finance History | 台北十信總社, 18 February 1985 — Taiwan Took Over a Failed Financial Institution

On 18 February 1985, Taiwan Cooperative Bank took over the business of the Taipei Tenth Credit Cooperative. At the cooperative's headquarters on Hengyang Road, an institution built on member deposits became Taiwan's first financial institution placed under such a takeover. Taipei Tenth Credit had grown from the prewar Taipei Credit Association into the country's largest credit cooperative, with 18 offices and more than 60,000 members. Its scale made weak governance a matter of financial stability rather than an internal dispute among cooperative members. Investigators found extensive illegal over-lending linked to chairman Tsai Chen-chou and affiliated businesses. By early February, loans totaled NT$15.4 billion against NT$15.1 billion of deposits, a 102 percent loan-to-deposit ratio that left little room to meet a rush for cash. The Ministry of Finance ordered the cooperative to suspend business for three days beginning 11 February. Public knowledge of the irregular lending had already damaged confidence, and withdrawals spread beyond a balance-sheet problem into a run involving related financial institutions. The 18 February takeover changed the mechanism of reassurance. Rather than asking depositors to trust the existing managers, the state transferred control to Taiwan Cooperative Bank, placing operations and the eventual assumption of the failed cooperative within a public-bank framework. That action protected continuity but did not erase the losses or excuse misconduct. Criminal proceedings, claims against managers, and the absorption of troubled assets continued after customers could again deal with a functioning institution. The crisis also accelerated Taiwan's financial safety net. The Deposit Insurance Act had been promulgated in January, but the Tenth Credit and related runs demonstrated the urgency of implementation; the Central Deposit Insurance Corporation opened on 27 September 1985. The surviving headquarters gives the episode unusual physical continuity. Built in 1927 for the Taipei Credit Association, it later housed Taipei Tenth Credit and now operates as Taiwan Cooperative Bank's Chengnei Branch, making one façade the record of cooperative growth, governance failure, and resolution. The accompanying photograph shows the former Taipei Tenth Credit headquarters at 87 Hengyang Road; it is by CEphoto, Uwe Aranas, licensed CC BY-SA 3.0 via Wikimedia Commons.