Thu, May 25, 2000 - Page 1 News List

News report triggers another bank run


Yet another bank has emerged as a "ticking financial time bomb," triggering consumer paranoia and a run on the financial institution -- the third since late April.

The Commercial Times (工商時報) reported yesterday that the Bank of Overseas Chinese (華橋商業銀行) -- already chin deep in overdue loans -- is currently being examined by the Ministry of Finance (財政部) for a possible takeover.

After the story hit the newsstands, depositors withdrew NT$1.7 billion from the financial institution, reports said, citing bank chairman Day Lin-in (戴立寧).

The panic follows closely similar bank runs on Chung Shing Bank (中興銀行) and Taiwan Development and Trust Corporation (台開信託).

The Commercial Times, citing what appeared to be leaked bank examination documents from the Central Deposit Insurance Corporation (CDIC, 中央存保), alleged that overdue loan ratios for the Bank of Overseas Chinese are excessively high at several of its branches.

The bank refuted the report yesterday afternoon, saying its bad loan ratio has shown improv-ement. In addition, the bank said that although overdue loans have reached nearly NT$20 billion (US$649 million), roughly 70 percent of that amount is secure and, therefore, potential losses from these problematic loans should be limited.

Moreover, the bank it said it wasn't facing any liquidity difficulties, as its reserves are more than NT$30 billion and its average monthly earnings are more than NT$300 million.

In addition, the Bank of Overseas Chinese denied the claim that the finance ministry had ordered several major local banks to study whether the institution would require outside intervention.

Several hours after the bank's rebuttal of the newspaper's charges, the finance ministry issued a statement of its own.

The ministry also denied that it had instructed other banks to study the possibility of a takeover. The ministry said that according to the last audit by the CDIC in August, the bank had allocated sufficient provisions to write off bad loans by the end of 1999.

Furthermore, the ministry said that at the end of March this year, the bank's net worth stood at NT$15.5 billion (US$503 million).

By late afternoon the crisis had spun full circle, with the beleaguered Bank of Overseas Chinese threatening to wage a legal attack on the Commercial Times.

Day said the newspaper failed to verify the facts in the report and that the bank may decide to sue.

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