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FSC may give Bowa more time for restructuring plan

The government may allow more time for debt-ridden Bowa Bank (寶華銀行) to improve its financial structure before intervening, the nation's financial regulator said yesterday.

The Financial Supervisory Commission (FSC) had previously required Bowa, one of the three troubled financial institutions blacklisted by the government, to raise NT$4 billion (US$121 million) by tomorrow.

"There is some flexibility about the deadline," commission spokesperson Susan Chang (張秀蓮) said yesterday.

Conducting talks

As the bank is now conducting talks with new investors, the commission will keep a close eye on the progress, Chang added.

Bowa is reportedly in talks with an Asian private equity fund after an earlier investment plan with Safuan Group of Malaysia collapsed earlier this month.

The failure of the bank's recapitalization plan would likely result in it being taken over by the government.

Bowa's asset quality quickly deteriorated with its net worth shrinking to NT$41 million last month, down from NT$973 million in March, commission data released yesterday showed.

The bank's unamortized losses total NT$25 billion.

Bowa deposits fell by nearly NT$3 billion to NT$129 billion in the past month, the data showed, but the bank has no imminent liquidity risk, Chang said.

Meanwhile, the grace period for cash-strapped Cosmos Bank (萬泰銀行) could also be prolonged, Chang said.

Fund injection

Cosmos needs a fund injection of NT$21.2 billion to raise the required NT$5 billion by the end of next month.

However, Cosmos will not be able to start capital reduction until July after its application was sent back by regulator last week.

Asset quality of local banks worsened slightly last month with the average non-performing loan (NPL) ratio of 41 domestic banks edging up to 2.35 percent from 2.32 a month earlier, the data showed.

The increase resulted from reporting of defaulted loans by several lenders after a local company experienced financial difficulty, Chang said.

She declined to specify if the company she referred to was Ya Hsin Industrial Co (雅新實業), one of the nation's leading printed-circuit- board makers.

More than 10 local banks yesterday reported defaulted loan payments by Ya Hsin to the Taiwan Stock Exchange.

First Commercial Bank (第一銀行) appeared to be owed the largest defaulted payments of NT$1.46 billion, followed by Mega International Commercial Bank's (兆豐國際商銀) NT$1.39 billion and Chinatrust Commercial Bank's (中信金控) NT$1 billion, their filings showed.

Unexpected application

Ya Hsin unexpectedly applied for bankruptcy protection and restructuring on Friday.

The company owes NT$18.9 billion to between 20 and 30 banks.

Chinatrust president of institutional banking James Chen (陳佳文) said creditor banks would not decide whether to oppose Ya Hsin's restructuring until seeing the company's detailed plan.

Chinatrust will reserve at least NT$5 billion to cover potential bad loans and does not expect it to have a big impact on the bank's profitability this year, Chen said.

With companies like Rebar Asia Pacific Group (力霸亞太企業集團) experiencing difficulties, the commission is mulling whether to require banks to disclose their top 10 conglomerate borrowers, bad loans and details of sales of bad loans exceeding NT$1 billion.
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