Sat, Sep 02, 2006 - Page 11 News List

FSC fines local lenders

WATCHFUL EYE Loose management of unsecured loan products resulted in large fines of NT$5 million for King's Town Bank and NT$3 million for Taitung Business Bank

By Amber Chung  /  STAFF REPORTER

The Financial Supervisory Commission yesterday heavily fined two local lenders for their poor internal control over managing their unsecured consumer lending businesses.

King's Town Bank (京城商銀), which is the successor to Tainan Business Bank (台南企銀), was fined NT$5 million (US$152,000), according to the commission.

The bank was penalized for its loose control over its subsidiary marketing firm, which distributes and sells the bank's unsecured consumer loan products designed specifically for military servicemen, the commission said in a press briefing.

The outsourced marketing unit of King's Town was accused of providing 31 fake applications and defrauding the lender of more than NT$30 million, the commission said.

No improvement

Taitung Business Bank (台東企銀) was also fined NT$3 million because the lender showed no signs of improving its poor internal controls and credit checks, which are necessary to grant unsecured consumer and small-sized and medium-sized enterprise loans, according to the commission.

The lender, which is ridden with bad loans, is on the government's watch list and posted a bad debt ratio of 22.83 percent. Its net worth shrank to only NT$89 million in July.

"We have demanded the bank bring up a plan for practical fundraising or a merger plan as soon as possible," commission spokesperson Susan Chang (張秀蓮) said at the briefing.

The commission said it is closely watching the Taitung Business Bank and is counting down to the deadline, according to Chang.

But another problematic lender -- Enterprise Bank of Hualien -- (花蓮企銀) also caused Chang to raise her eyebrows yesterday.

The small lender is expected to soon put forth a restructuring plan that would attract "enough foreign investment to turn its negative net worth at minus NT$1.8 billion into positive territory by 2008," Chang said.

Foreign suitors

She didn't elaborate more on the foreign investment front, but said the bank has briefed Nassau Inn Investments Limited and several investors from Malaysia on its business operations and future prospects.

Problematic banks on the financial regulator's watch list that fail to clean up their ledgers will be taken over by the government's financial restructuring fund and their current management team will be replaced, according to the commission.

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