Chang Hwa Commercial Bank (CHB,
Taiwan prosecutors yesterday morning seized evidence related to a NT$800 million (US$25.6 million) loan granted by the bank which was allegedly based on fraudulent documents, local media reported, citing the prosecutor in charge of the case, Shen Ming-lun.
Shares of the embattled bank yesterday fell NT$1.50, or by the 7 percent daily limit, to close at NT$20.50.
The case weighed heavily on the local banking sector, pulling shares of other banks down to their daily limits, including those of Hsinchu International Bank, China United Trust and Development Co, Taiwan Development and Trust Corp and Chung Shing Bank.
Investigators suspect that Chang Hwa's Hsinshing Branch in Kaohsiung had accepted falsified documents provided by a local business group in 1997 and offered NT$1.5 billion in loans to Fu Yow Enterprise (
The loans were to be used to build an amusement park in southern Taiwan -- a project that apparently never got off the drawing board.
Fu Yow put up a 35-story building as collateral that the bank is "actively pursuing debt collection and is confident it will be able to get most of the loan back," Chang Hwa said in a statement.
The bank has already classified the loan to Fu Yow as overdue and is prepared to make full provisions to write it off, the statement said.
Chang Hwa spokesman and vice president, Chang Sung-er (
Shih Liang-po, an investigator in charge of the probe, told the media that investigations are also being launched into other potentially inappropriate lending practices by Chang Hwa Bank, but would not elaborate further.
Chang Hwa isn't the first company implicated in President Chen Shui-bian's (
Chen rose to power touting an anti-corruption platform, promising to stamp out cozy ties between business and government officials. The raid on the Chang Hwa expands the government's list of banks probed since Chen's inauguration to three. Previously two other banks -- Taiwan Development Trust Company (
Earlier this week, President Chen renewed his pledge to crack down on corruption saying: "Regardless of how far reaching the impact and the rank of their offices, we have to carry on with our [anti-corruption] investigations."
Prosecutors yesterday took away three cartons of what they described as evidence and began to interview Chang Hwa officials, local media reported. Chang Hwa Bank had accumulated at least NT$83 billion in overdue loans, one newspaper reported, citing unidentified sources.
Meanwhile, the overdue loan ratio for financial institutions nationwide reached a new high according to the most recent Ministry of Finance figures. According to the ministry the total value of overdue loans for banking institutions at the end of the second quarter came to NT$850 billion, while the average overdue loan ratio rose to 5.93 percent.
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