Debt-ridden Chinfon Commercial Bank (慶豐銀行) was officially taken over by Taiwan’s Central Deposit Insurance Corp (CDIC) at 5pm yesterday on instructions from the Financial Supervisory Commission (FSC).
“Chinfon has been performing badly with a deteriorating financial condition,” the CDIC’s press statement said yesterday.
CDIC said that bank depositors can be at ease since their rights are fully protected and the bank has long been included in the Financial Restructuring Fund’s bailout scheme since 2005.
PHOTO: CNA
Under the government’s custody, Chinfon would not discontinue its financial services, CDIC said in the statement, adding that Bank of Taiwan (台灣銀行) would be commissioned to manage the bank.
At the same time, the rights of the bank’s management, board members and shareholders would be suspended, it said.
As of the end of last month, Chinfon had a negative worth of NT$7.718 billion (US$240 million) with the nation’s highest ratio of non-performing loans at 29.26 percent, the commission’s latest statistics showed on Thursday.
The bank, with 34 outlets in Taiwan, had NT$78.24 billion in savings and granted NT$47.57 billion in loans, the commission said.
After the takeover, the bank would still keep a liquidity of around NT$10 billion.
The takeover unexpectedly came three days after the FSC insisted that the government had its reasons for delaying the takeover decision even though the bank had been in the red since late last year.
In an emergency press briefing last night, FSC Chairman Gordon Chen (陳樹) said that “the bank has satisfied the Banking Law’s (銀行法) Article 62,” which stipulates that banks be taken over when they are incapable of repaying liabilities or are likely to jeopardize depositors’ rights.
After careful evaluation, the commission found that the feasibility of the bank’s proposal to turn itself around was low and thus decided to take the bank over immediately, Chen said.
Also, the commission received a letter from its counterpart in Vietnam on Monday to express the Vietnamese regulator’s full support behind the local government’s decision to take over Chinfon.
“But every penny of the bank’s deposits will be protected,” Chen said.
On Tuesday, Chen told lawmakers that Chinfon had a worse-than-expected financial profile, which scared the bank’s time depositors into withdrawing more than NT$1 billion in the following days.
As Chinfon is liquidating two branches in Vietnam that are performing well, the commission said on Tuesday afternoon that the regulator would only take action after those two overseas branches had been liquidated, for fear of ruining the nation’s reputation as having a well-regulated financial market.
The commission said at the time that Vietnamese regulators might freeze assets of the two branches once the Taiwaneses government stepped in to take over Chinfon in Taipei.
The commission’s negative comments had invited criticism from Chinfon chairman Huang Shih-hui (黃世惠), who lambasted Chen on Wednesday and demanded Chen shoulder responsibility if the bank’s depositors started panicking because of his comments.
Huang was on a business trip abroad and couldn’t be reached for comments on the takeover yesterday.
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