FSC hands bank probe to investigators

The Financial Supervisory Commission has handed a suspected illegal trading case involving The Chinese Bank (中華銀行) and other firms over to prosecutors for investigation as the probe into possible embezzlement widens, the commission said yesterday.

"We found frequent and substantial amounts of unusual selling activity of The Chinese Bank, Chia Hsin Food & Synthetic Fiber Co (嘉新食品化纖) and China Rebar Co (中國力霸) shares last month before the latter two companies filed for insolvency protection on Thursday," Wu Tang-chieh (吳當傑), director general of the commission's Securities and Futures Bureau, said during a press conference yesterday.

Insiders

The regulator has identified one insider in each firm who offloaded 7.8 million shares of Chia Hsin shares and 2 million shares of The Chinese Bank. This information was passed on to the authorities for further investigation, Wu added.

Meanwhile, the commission also fined individuals at Chia Hsin and China Rebar an aggregate NT$4.8 million (US$146,900) for the two companies' unlawful delay in disclosing their request for insolvency protection on Dec. 29.

The Securities and Exchange Law (證券交易法) states that publicly traded companies are required to disclose any information that will pose a significant impact on share price and shareholders' rights and interests.

The commission said it is investigating alleged loans made illegally by The Chinese Bank to firms under the parent Rebar Asia Pacific Group (力霸亞太企業集團), which reportedly controls up to 136 companies.

One member of the group, Great Chinese Bills Finance Corp (力華票券), allegedly provided NT$6.8 billion in questionable financing to affiliates.

Withdrawals

Despite the reassurances given by the government, people yesterday were still rushing to The Chinese Bank's branches to withdraw their money.

The commission estimated the bank lost approximately NT$16 billion yesterday, less than losses reported on Friday.

Corporate customers were also starting to put their money back into the bank, commission spokeswoman Susan Chang (張秀蓮) said.

The financial watchdog said it was confident that the extra NT$30 billion in reserves provided by the government restructuring fund and Central Deposit Insurance Corp (中央存保) would be sufficient to cover the sudden savings withdrawals.

The string of takeovers of struggling financial institutions by the government over the weekend had a noticeable impact on the stock market.

The financial sub-index plunged 1.38 percent -- more than the 1.26 percent fall in the benchmark index recorded yesterday.

Shares of Cathay Financial Holding Co (國泰金控) and Taiwan Cooperative Bank (合作金庫銀行) -- the two principal creditors of Great Chinese Bills Finance Corp who took over the bill financing firm over the weekend at the request of the commission -- closed down 2.64 percent and 0.41 percent at NT$73.9 and NT$24.4 respectively, on the local bourse.