Insolvencies will be investigated: Su

Premier Su Tseng-chang (蘇貞昌) said yesterday that those responsible for a crisis involving the Chinese Bank under the Rebar Asia Pacific Group will be dealt with strictly.

The Central Deposit Insurance Corp (CDIC) was instructed by the Financial Supervisory Commission (FSC) to take over The Chinese Bank -- a member of the Rebar Asia Pacific Group -- on Saturday in the wake of a bank run triggered by the insolvency of two other companies.

Su said the government had stepped in to take care of the crisis to ensure that not a dollar of clients' money would be affected. He urged the public to stop withdrawing deposits from The Chinese Bank, stressing that their savings were secure and that depositors "will not lose even a dime [from The Chinese Bank.]"

An advertisement was placed on the front page of several local newspapers yesterday, endorsed by FSC Chairman Shih Jun-ji (施俊吉), Minister of Finance Ho Chih-chin (何志欽) and central bank Governor Perng Fai-nan (彭淮南).

The advertisement read: "The government has taken over The Chinese Bank. It has become a bank owned by the government. The national treasury guarantees all types of deposits, regardless of the amount."

Su also outlined principles for handling the financial crisis of the Rebar Asia Pacific Group and investigating whether there was premeditation behind insolvency claims made by the group's two units.

"We will deal with the case in accordance with three principles -- banning responsible persons from the group from leaving the country, freezing their assets and punishing their irregularities severely," Su told the press yesterday morning.

A Cabinet official later said that Su had suggested that some aspects of the insolvency claims may have broken the law.

"The reasons why [China Rebar Co (中國力霸) and Chia Hsin Food & Synthetic Fiber Co (嘉新食品化纖)] applied for insolvency after [the group's Chairman] Wang You-theng (王又曾) went to China must be investigated," the official said on condition of anonymity.

Later yesterday, Shih, Ho and Perng along with President of the Central Deposit Insurance Corp (CDIC) Johnson Chen (陳戰勝) and other financial officials, called a press conference urging the public not to worry about their deposits in the Chinese Bank.

"Today the CDIC withdrew NT$11 billion from the central bank and injected it into The Chinese Bank. Another NT$20 billion [US$613.2 million] is to be allotted to The Chinese Bank tomorrow [today], which will be enough for withdrawals," Chen said.

During the press conference, Shih said that there would be no crisis triggered by Rebar Group's financial troubles because the government had "more than NT$100 billion" in funds at its disposal in case of problems.

also see stories:

Rebar chief fled to China before insolvency claims

New bank runs not likely, analysts say