Standard & Poor's Ratings Services (S&P) said yesterday that because of effective government action, a run on The Chinese Bank (中華銀行), a member of Rebar Asia Pacific Group (力霸亞太企業集團), is not expected to have a significant impact on system confidence or stability.
The government tends to support imperiled retail deposit-taking financial institutions and it vowed to protect The Chinese Bank's depositors, who account for less than 1 percent of total banking deposits, S&P said.
The possible collapse of the highly leveraged Rebar Group is not expected to hit the banking industry too hard, given that lending to the two insolvent group affiliates is estimated at only 0.2 percent of total outstanding loans, while overall lending to the Rebar Group is estimated at less than 1 percent, S&P said.
Still, shares for the financial sector were down by 2.23 percent on the main bourse yesterday due to lingering worries over the troubled Rebar Group, outperforming a decline of 1.17 percent on the benchmark TAIEX.
S&P yesterday said Taiwan's bad loan ratio would stand at 3 percent to 4 percent for the end of last year.
The impact on Mega International Commercial Bank (兆豐國際商銀), one of the largest creditors for the group, is expected to be minimal because its exposure accounts for only a small proportion of its total business, the ratings agency said.
Mega International is a banking unit of Mega Financial Holding Co (兆豐金控). Its moderate profitability and satisfactory capitalization are likely to absorb any potential increase in credit costs, according to S&P.
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