Foreign bank to aid Chung Shing

The Ministry of Finance and a supervisory group have decided to bring in a foreign bank to aid in the capital expansion of Chung Shing Bank (中興銀行), Chinese-language media reported yesterday.

The foreign bank, which the paper doesn't identify, already signed a confidential agreement with the authorities to invest in Chung Shing.

The newspaper said that given financial authorities' instruction, the financially-troubled Chung Shing next week will stage a large-scale reduction in capitalization followed by recapitalization, during which a foreign interest will put up capital and take control of the bank.

That is, Chung Shing is expected to cut its capital by NT$11 billion next week in order to write off its losses, before expanding the capital by NT$12 billion to NT$18 billion, the paper elaborated.

It also said the task force currently charged with running the bank signed a secret agreement with the foreign interest at the end of May.

Chung Shing will hold a shareholders' meeting on June 22 to finalize the recapitalization details, and after the meeting concludes, the Ministry of Finance is expected to publicly announce the party that plans to take control of the bank.

Meanwhile, Chinese language media also reported yesterday that a fifth bank merger could be announced by the Ministry of Finance before the end of next week.

The report quoted Minister of Finance Yen Ching-chang (顏慶章) as saying that the he hopes to announce a bank merger between two small, private banks before his overseas trip at the end of next week.

Officials from the Ministry of Finance and the Securities and Futures Commission (證期會), along with top corporate executives, are expected to head for Europe then as part of a worldwide roadshow to woo foreign investors to Taiwan.

The potential merger announcement would follow three government-orchestrated merger plans that separately include Bank of Taiwan (台灣銀行), First Commercial Bank (第一商銀) and Chinfon Commercial Bank (慶豐商銀). Makoto Bank (誠泰銀行) late last month said it would acquire Chiayi Second Cooperative (嘉義二信) in southern Taiwan.

Yen has said that his ministry will complete 10 bank mergers by the end of this year.