Keng Ping (
Those close to Keng say that his resignation is understandable, in light of the internal conflict and pressures he was forced to endure during his tenure at the bank.
Almost all of the original presidents of the 10 newly established banks have now left their positions. Some banks have already changed presidents a number of times.
Of the original bank presidents, only Ting Tung-yuan (
The high turnover rate for presidents gives an inkling of the pressure that goes with the position. This pressure comes from a deteriorating banking sector, as well as from trying to smooth out internal operations and coordinate administrative functions. In addition, large shareholders and the board of directors often interfere in management, and factional squabbles often plague the banks. Such reasons most probably also led Keng into resigning his position.
The Dah An Commercial Bank was once a shining star of the banking field. The performance of Dah An earned it an excellent reputation since its founding eight years ago. Its image, the background of its large shareholders and supervisors, as well as the academic and industry experience of its presidents all surpassed that of its peers.
The Asian financial crisis that swept through Taiwan last year triggered a rash of corporate failures that influenced Dah An. Some of the more serious cases involved the Chinese Automobile Co, Ltd (
The bank is still sitting on 10,000 shares of Chinese Automobile Co stock bought put up in collateral by the Chang family, leading to NT$20 billion in loans to the corporate group. When the value of the stock collateral plummeted, Dah An suffered.
The bank's overdue loan ratio continues to rise, and even though the bank has canceled nearly NT$100 million in bad loans each year, the bank's overdue loan ratio reached a record 3.71 percent in August. The bank registered a monthly loss of NT$400 million last December in an attempt to bring down the overdue loan ratio, putting the bank's reputation in question.
E. Sun Bank (
In addition to public concern over shaky "land mine" investments, Dah An's board members also registered their dissatisfaction with the bank's management and operations. Keng, the one ultimately responsible for the success or failure of the bank, was an obvious choice to be a target.
The huge increase in bad loans and a falling profit rate led Dah An to announce a pay cut for high-level managers, the first bank in Taiwan to do so. Loh Jun-kang (
For a bank the size of Dah An, this figure is more symbolic than anything else. Loh stated that this latest move, "was undertaken for the large shareholders," revealing that the management team at the bank is under severe pressure from the board of directors.
Keng tendered his first resignation soon after the pay cuts were announced, foreshadowing his departure six months later. Keng also sold 80 percent of the bank's stock he owned at this time, dropping the number of shares he owned from 600 to around 100. Keng announced that the stock sale, "was motivated by personal financial need," but it was clear what the sale meant.
Keng began to consider leaving the bank for three reasons: self-criticism over his lack of loan supervision, pressure the board of directors began to exert after the Asian financial crisis broke, and the long-term heavy-handed attitude of Loh. Blame for exploding landmine stocks then shifted to Keng.
The share ownership of Dah An stock is dispersed, with little investment by financial groups. Most of the large shareholders hold under 5 percent of stock, including Chiao Ting-piao (
Other prominent shareholders include Nita Ing (
Sun Tao-tsun (
The board of directors did not seriously interfere in the management of the bank when it was first set up, compared to other new banks. Bank managers still had a considerable amount of control over the bank's direction. When a string of companies closely connected to the bank began to experience financial problems, affecting the bank's performance, however, the board of directors began to play a larger role in the bank's affairs. Criticism at this time was directed at Keng, the bank's president.
Keng Ping (literally meaning peaceful and upright in Chinese) is generally agreed to be true to his name, exceedingly straightforward and honest. With a scholarly background, and little experience in back-room politics, Keng sometimes rubbed others the wrong way.
Keng maintained a professional relationship with the board of directors throughout his term as president, and did not attempt to develop any kind of special relationship with the board. This attitude did not present any problems when the bank was performing well, but when trouble struck, as it did last year with the financial crisis, this kind of behavior got Keng branded as "lacking communication skills."
The board of directors felt that there was a problem with the quality of the bank's loans. First they said the bank was too liberal in granting loans, and later when the crisis broke they criticized the bank for its inability to call in overdue loans. Keng admitted that there were oversights in some of the loans, resulting in the bank stepping on a few "land mines."
But Keng is not pleased with the way shareholders have ignored the difficult financial climate, and their constant calls for high performance. He feels that investors have grown used to putting money into new banks and getting very high returns and cannot accept the lower returns they are now getting.
This is one of the difficulties of non-professional financial investors trying to move into a financial field. Moreover, Keng says, each of the large loans which subsequently went bad was approved by the board of directors, but Keng got all the blame for the subsequent failures.
Toward the end, Keng refused to sign a number of loans approved by the board, sending the papers directly to Loh's desk, showing a resolve to leave the bank.
Keng began as a vice chairman of the Chiao Tung Bank (
Also, serious factional differences existed in the bank's management, even though it had only been set up for eight years. The bank's largest shareholder, Chiao Ting-piao, thought that the decision to cut managers' salaries would send the wrong signal to the market, and argued with Loh about the decision.
In the end, Chiao resigned from his position as vice chairman of the board. Keng tendered his resignation around the same time, but Loh convinced him at the time to stay on as president. Loh told Keng he would have to deal with some of the more serious problems the bank was going through before he could leave.
Keng's resignation was approved in the bank's Aug. 26 board meeting, granting early retirement to Keng who turns 55 this year. In order to allow Keng to qualify for the bank's minimum of 10 years of service for retirement, the board agreed to keep Keng on the staff as a paid consultant. Keng will be eligible to collect special retirement benefits by the end of this year, when he will have served for 10 years at the bank. This shows the benevolence of the bank's board of directors.
Loh also hopes to keep Keng on the board of directors, and bring him on as the rental director of the bank. The question remains, however, whether Keng, still hurting from his recent tenure as president, and now on vacation, will accept the offer.
Hsu Yuan-chun (
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