Mon, Jan 01, 2018 - Page 16 News List

Banks fined over Ching Fu loan

REVITALIZATION:The FSC is to allow local banks’ asset management units to hold at least 5 percent of companies that are carrying out urban development projects

By Kuo Chia-erh  /  Staff reporter

The Financial Supervisory Commission (FSC) on Friday handed 14 banks a combined NT$40 million (US$1.34 million) fine for poor internal controls in a high-profile scandal involving Ching Fu Shipbuilding Co (慶富造船).

State-run First Commercial Bank (第一銀行) is facing a fine of NT$10 million, the highest allowed under the Banking Act (銀行法), while the Land Bank of Taiwan (土地銀行) and the Bank of Kaohsiung (高雄銀行) are to each be fined NT$8 million, the commission said.

The Bank of Taiwan (臺灣銀行) and Mega International Commercial Bank (兆豐銀行) are to each face fines of NT$4 million, while NT$2 million fines have been handed to Taiwan Business Bank (台灣企銀), Hua Nan Commercial Bank (華南銀行) and Taiwan Cooperative Bank (合作金庫銀行), the commission said.

Six other banks are to receive non-penalty punishments, it added.

The Ching Fu affair is being investigated by prosecutors, while the commission’s focus is to pinpoint the shortcomings of banks’ credit checking and lending processes, FSC Chairman Wellington Koo (顧立雄) said at a news conference, adding that the commission expects the banks to start fresh this year.

The punitive measures were in response to violations of credit extension regulations and rules against money laundering in the banks’ syndicated loan to finance Ching Fu’s building of minesweepers for the navy, Koo said.

The banks’ total exposure to the shipbuilder reached NT$23.4 billion as of Nov. 30, with maximum total losses from the loan default amounting to NT$17.2 billion, FSC statistics showed.

As the leading lender, First Commercial Bank failed to ensure Ching Fu’s ability to repay the loan, the commission said.

The Land Bank of Taiwan also failed to conduct a thorough investigation for its loan to Ching Fu affiliate Ching Yang Aqua Marine Enterprises Co (慶陽海洋), it added.

The banks are required to discuss concrete measures to address the flawed loans to Ching Fu and its subsidiaries at their upcoming board meetings, the commission said.

Separately, the asset management units of local banks are to be allowed to invest in companies engaged in urban renewal, the FSC announced on Friday.

The move is meant to encourage lenders to participate in the government’s efforts to revitalize aging urban areas.

The commission said it has amended regulations to allow a bank’s asset management unit to hold a maximum stake of 5 percent in an urban renewal-focused company.

The FSC said it estimates that more than NT$200 billion could flow into urban renewal projects after the relaxation.

Asset management firms have in recent years seen a substantial decline in the number of bad assets due to improved asset quality, which has prompted firms to seek other income sources.

Considering the asset management firms’ expertise in debt integration, the commission said the relaxation is meant to direct financial resources to social development and urban rejuvenation.

Additional reporting by staff writer

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