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Banks take over Rebar's bills financing subsidiary

The financial regulator yesterday ordered the takeover of a bills financing company by two banks as the Rebar Asia Pacific Group (力霸亞太企業集團) saw its financial troubles extend to other members of the conglomerate.

The state-controlled Taiwan Cooperative Bank (合作金庫銀行) and the private Cathay United Bank (國泰世華銀行) will take over the financially strapped Great Chinese Bills Finance Corp (力華票券) effective 9am today, Financial Supervisory Commission Chairman Shih Jun-ji (施俊吉) said last night.

Great Chinese Bills, 70 percent held by the Rebar Group, reported a funding gap of NT$1.7 billion (US$52.2 million) yesterday.

It was the second takeover of a financial company under the Rebar Group. The government's Central Deposit Insurance Corp (中央存保) took over The Chinese Bank (中華銀行) at midnight on Friday.

The financial regulator yesterday assured the public that depositors' money would be fully protected by the Central Deposit.

"The Chinese Bank has become a national and public bank after the takeover ... Every dollar deposited by the public is now fully secured and [public] interest is guaran-teed," Shih told a press conference.

News that the government on Thursday had approved the applications for insolvency protection by two of The Chinese Bank's affiliates hit the bank hard on Friday, with panicked depositors swarming its branches and the bank finally asking the government to step in.

In a statement filing with the Taiwan Stock Exchange Corp late on Friday night, the bank said it had incurred "abnormal money withdrawal" on Friday because of the effect of the insolvency claims by China Rebar Co (中國力霸) and Chia Hsin Food & Synthetic Fiber Co (嘉新食品化纖).

The bank said it lost more than NT$15 billion (US$460 million) on Friday alone and had a big funding gap, the statement read.

Shih said the bank voluntarily asked for a takeover after facing a cash flow problem.

"It started with individual depositors ... [followed by] corporate clients who also demanded their money back ... then we got a phone call from the bank at around 4pm to 5pm saying if we do not take over, it will have no money to deal with further withdrawals next Monday," a cable TV channel broadcast showed Shih as saying.

Shih said that the Central Deposit Insurance will inject as much as NT$30 billion into the bank tomorrow in preparation for further withdrawals.

During the same press briefing yesterday, Central Bank of China Governor Perng Fai-nan (彭淮南) stressed that there was no systemic crisis in Taiwan's banking sector, and asked depositors to stop further withdrawals or risk losing some of their interest income.

The Chinese Bank has 35 branches in Taiwan. Taiwan Ratings (中華信評) on Wednesday affirmed its "twBBB-" long-term and "twA-3" short-term credit ratings, with a negative outlook for the bank.

"The ratings continue to reflect The Chinese Bank's pressured capitalization, below-average asset quality, and weak profit-ability," Taiwan Ratings said at the time.

Shares of the bank will be traded on a cash basis only beginning tomorrow, while those of China Rebar and Chia Hsin were suspended on Friday.
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