The Taiwan government may seize troubled Chung Shing Bank (中興銀行), paving the way for the lender to be sold to a rival as part of a consolidation of the banking industry.
Taiwan's Ministry of Finance may order the financial reconstruction fund, which is similar to the US Resolution Trust Corp, to take control of the bank as early as this Sunday, following Chung Shing's failure to sell NT$15 billion (US$434 million) worth of shares to increase its capital, the local Chinese-language media reported, citing Tseng Kuo-lieh (
The proposed seizure prompted concern from investors, who are worried about the economic consequences of state support for ailing financial institutions.
The Resolution Trust is expected to pump about NT$20 billion in funds into Chung Shing in exchange for its troubled assets before selling the bank to another lender, according to local media.
"The danger of the government reaching out to failing banks is they may get pulled down by it," said Lin Tsui-pin (林翠萍), who manages Prudential Securities Investment Trust Co's (保誠投信) NT$400 million Financial Fund. "They will soon run out of bullets."
Taiwan's finance ministry declined to comment.
In April, the government ordered its Central Deposit Insurance Corp (
The stock was suspended from trading on Oct. 4.
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