Sat, Aug 11, 2007 - Page 1 News List

Financial regulator orders CDIC to take over troubled Bowa

By Jason Tan  /  STAFF REPORTER

The Financial Supervisory Commission (FSC) announced the takeover of Bowa Bank (寶華銀行) by the state-run Central Deposit Insurance Corp (CDIC, 中央存保) at 3:30pm yesterday.

"Bowa failed to bring in fresh capital to rescue its performance. Its book value deteriorated to negative in June," the financial regulator said in a statement released yesterday.

CDIC commissioned the state-owned Land Bank of Taiwan (土地銀行) to send a 10-person task force to manage the operations of Bowa during the transition period, the commission said.

Bowa had approved a plan at its annual general meeting in June to raise NT$8 billion (US$243.2 million) in a bid to improve its financial structure.

The lender has said it remained in talks with interested investors.

Even so, Bowa -- one of the three lenders that remain blacklisted by the government and has a network of 39 branches nationwide -- continued to post losses in the past few months while failing to pay off debts amid falling deposit levels.

"The takeover is not surprising, as Bowa is on the FSC blacklist. It was only a matter of when," said Charles Yeh (葉銀華), director of the Graduate Institute of Finance at Fu Jen Catholic University.

It would not have been able to carry on much longer, as efforts to pull in new funds had failed, he said.

Since last year, the government has taken over several failed lenders as part of its industry consolidation effort, including The Chinese Bank (中華銀行) and China United Trust and Investment Corp (中聯信託)

Goldman Sachs analyst Vincent Chang (張進森) said the takeover would not impact the fragile financial stocks that were hit by the meltdown in the US subprime mortgage market.

But investors should watch out for the possible takeover of other small banks also on the blacklist, such as Chinfon Bank (慶豐銀行), Chang said.

The FSC said consumers had no reason to worry about their savings, as all the money was safe and the Land Bank would take steps to ensure operations are not disrupted.

Bowa posted a net loss of NT$4.3 billion for the first half of the year, and its net value plunged to negative NT$2.3 billion in June from NT$419 million in March, the commission's figures show. Deposits were down to NT$132 billion in June from NT$143.5 billion in March.

Additional reporting by Jessie Ho

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