UPDATE 1-Taiwan considers extending bank deposit guarantees

TAIPEI, Feb 9 - Taiwan is considering extending a government programme guaranteeing 100 percent of all bank deposits, an official said on Monday, giving it flexibility with the confidence-boosting scheme during the global downturn.

Under the original plan set up last year, the government said it would guarantee all bank deposits through the end of 2009, a move it took to reassure depositors at the height of the global financial crisis last fall.

That plan is set to expire on Dec. 31 this year.

"At the moment we are studying an extension of the guarantee," said the official at the Financial Supervisory Commission, Taiwan's financial regulator, speaking on condition his name not be used because he was not authorised to speak to the media.

"We will look at the economy and financial environment and will also look at what other countries are doing," he said.

He said it was too early to comment on the duration of any extension, after local media reported the government was looking at possibly continuing the programme through the end of 2010.

Taiwan first announced the programme in October last year, in a move to restore domestic investor confidence as fallout from the global financial crisis deepened. [ID:nTP354942]

The move was one of many taken by Taiwan to address the crisis, amid concerns that depositors could withdraw their money from smaller, weaker banks en masse, undermining the financial system.

The government has taken a wide range of other measures as well, from a series of aggressive interest rate cuts by the central bank to limitations on daily declines in the stock market and a ban on short selling last year.

The deposit guarantees have come under fire from some larger, healthier banks that say the scheme helps smaller, shakier banks at their expense.

Banking shares were mixed in Monday trade, with the financial and insurance sub-index <.TFNI> down 0.05 percent, trailing the broader market's 1 percent rise, as larger banks generally traded lower while smaller banks rose.

Shares of Cathay Financial <2882.TW>, Taiwan's top financial holding company, were down 0.48 percent, while other top players like Taishin <2887.TW> and Shin Kong <2888.TW> were also down.

Meanwhile, smaller companies like E.Sun Financial <2884.TW>, Taiwan Business Bank <2834.TW> and Yuanta Financial <2885.TW> were all trading higher.