To prevent a further dip in confidence in the nation's financial system following the recent run on The Chinese Bank (
The government's action has reduced the likelihood that the financial crisis will expand and negatively affect the economy. The other good news is that The Chinese Bank isn't big enough to have much of an impact on the financial system.
Nevertheless, for prospective customers, the incident offers a warning on the importance of carefully choosing a reputable bank.
The Chinese Bank's shares have become "full-cash delivery stocks" (
For investors, the bankruptcy should serve as a warning to prospective investors to be on the lookout for dishonest shareholders and poor company management.
With customers' deposit accounts secure, the real difficulty lies in the billions of dollars owed by the Rebar Asia Pacific Group's (
The Ministry of Economic Affairs must provide guidance on China Rebar (
If the courts were to decline the application and creditors didn't show leniency, the two companies could collapse.
The victims would not only be the banks that have made loans to China Rebar's companies and the suppliers who wouldn't get paid, but also the multitude of workers who would face unemployment.
However, if the courts allowed the companies to restructure, or creditors were required to accept repayment over an extended period, the result could be even worse.
As the drama unfolds, it has become apparent that large financial conglomerates like Rebar have muddled the relationship between government and industry. As their individual companies absorb serious losses, the conglomerates take on even greater debt. In the face of increasing debt, government supervisory offices become loath to act and the ticking time bomb threatens to explode.
Rebar's financial troubles have highlighted potential problems at the heart of some of the nation's family-run financial groups. Sometimes their owners treat these banks like private cash reserves, selling off or concealing their assets, then leaving their debts behind.
Media reports suggest that although China Rebar is bankrupt, Rebar Group chairman Wang You-theng (
Wang's willingness to spend money in China while his Taiwanese companies were saddled with debt deserves the harshest condemnation.
Many people suspect that through complex stock investments and asset transfers, Rebar has given its most promising enterprises and assets to the second generation of major family shareholders. Investigators and top financial officials must conduct a thorough investigation into this matter.
If the Wangs are attempting to use client investments to profit family members, those responsible must be brought to book.
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