Sat, Dec 24, 2005 - Page 11 News List

S&P says Bank SinoPac will weather ban storm

FACTORING EXPOSURE The ratings firm considered that the bank's relationship with the International Bank of Taipei was among the reasons for retaining its confidence


Credit ratings for Bank SinoPac (建華銀行) are not expected to be immediately affected by a financial regulator's decision on Thursday to suspend the bank's new factoring business for six months from Jan. 1, Standard & Poor's Ratings Service said in a statement yesterday.

Factoring refers to short-term financing from the nonrecourse sale of accounts receivable by a third party, known as a factor.

The practice allows lenders to grant loans using accounts receivable as collateral. Factors assume the full risk of collection, including credit losses.

S&P said the regulator's ban will only have a limited impact on the bank's overall credit profile.

"Although factoring is one of Bank SinoPac's core businesses, its profit contribution has been less than 10 percent of annual pre-provision profits in recent years, and the bank can still generate profits from its outstanding factoring exposure," S&P said.

"In addition, the bank can retain clients by leveraging its close relationship with International Bank of Taipei (台北商銀), with which it will merge in 2006," the ratings agency added.

S&P has "twA+" long-term and "twA-1" short-term counterparty credit ratings on SinoPac, with a stable outlook.

Bank SinoPac, a unit of SinoPac Financial Holdings Co (建華金控), was banned by the Financial Supervisory Commission from lending using debt as collateral after a local regulator said one of its branches helped clients overstate their account balances on statements.

S&P said it will carefully monitor the impact of the suspension on the bank's operations and its relationship with customers.

In response, SinoPac Financial said in a statement to the Taiwan Stock Exchange yesterday that it did not expect to see a significant impact on the bank's overall operations.

"We'll step up controls on similar cases according to the law," it said in the statement.

Also on Thursday, the commission penalized Taishin International Bank (台新銀行), a unit of Taishin Financial Holdings Co (台新金控), with a fine of NT$10 million (US$301,600) for holding much more foreign currency than its quota permitted.

Taishin, the second-biggest credit-card issuer in the nation, held more than US$300 million, exceeding the US$30 million it is allowed per day, commission spokesman Lin Chung-cheng (林忠正) said.

The incident happened "because our foreign-exchange operations developed too fast and we made an error in calculating foreign-currency positions," Taishin spokeswoman Sarita Hao (郝名媛) said. "We won't make the same mistake again."

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