Bowa told to pass financial plan or risk a takeover

The Financial Supervisory Com-mission (FSC) said yesterday that the debt-ridden Bowa Bank (寶華銀行), one of the remaining four blacklisted lenders, must submit its new financial restructuring plan by the end of this month to prevent a government takeover.

"We have asked Bowa to submit a new fundraising plan that explains clearly its funding sources before the end of this month," FSC Chairman Hu Sheng-cheng (胡勝正) said in his first question-and-answer session at the legislature's Finance Committee.

The commission had rejected Bowa's old restructuring plan, Hu said, without elaborating.

The commission hopes the lender can raise fresh capital amounting to NT$12 billion (US$363.32 million) this year and another NT$13 billion next year to effectively revamp its financial profile, he said.

Bowa's financial condition has continued to deteriorate with its net value dropping to NT$3.27 billion in January from NT$3.97 billion a month earlier, while its bad debt ratio climbed to 12.28 percent from 10.83 percent during the same period, FSC data showed.

In response, Bowa said it would present a new plan before the deadline and was aggressively pursuing talks with interested European and Japanese foreign investors.

The bank plans to raise NT$5 billion on top of its NT$10.17 billion in paid-in capital.

"We do need much more money to cover the financial gap as the commission said, given that the injection of a few billion dollars would not be enough to bail us out of financial difficulty," one of the bank's executives said on condition of anonymity.

Based on its financial restructuring plan, Bowa will eventually be controlled by foreign investors, which would hold a more than 70 percent stake, the executive said.

The lender has undergone a board reshuffle this year, with former chairman Kuo Cheng-chao (郭正昭) and two independent directors resigning, which sparked speculation that it was having difficulty raising funds.

Meanwhile, lawmakers expressed their concern that the government might not have enough funds to handle the four remaining debt-ridden financial institutions after taking over three problematic banks within three weeks in January.

Hu replied that the commission had more than NT$70 billion in funds at its disposal, including NT$40.8 billion in the government restructuring fund and money from the deposit insurance fund pool.

Chinese Nationalist Party (KMT) Legislator Lee Jih-Chu (李紀珠) said that under the new banking regulations, a total of 12 banks, including seven already blacklisted ones, would need financial restructuring.

An amendment to the Banking Law (銀行法), passed by the legislature on March 5, requires lenders whose losses exceed one-third of their paid-in capital to raise fresh capital to improve their financial condition.

Hu said that the commission would give those lenders time to file their fundraising plans within the prescribed grace period.