SinoPac Financial Holdings Co (永豐金控) yesterday said it will exercise more caution when offering financial products to customers after the Financial Supervisory Commission prohibited its banking arm from selling risky currency products for a year.
“We will review our sales strategy and correct negligent behavior, as the commission instructed,” SinoPac Financial spokesman Michael Chang (張晉源) said by telephone.
The industry regulator late on Monday decided to suspend Bank SinoPac (永豐銀行) from the sale of Target Redemption Forward (TRF) products — financial derivatives structured like currency options — for a year, as the lender failed to disclose the risks involved or consider clients’ risk tolerance and capacity.
Clients took their collective complaint to the commission when the investment caused losses.
Bank SinoPac is required to review its bonus policy and punish culpable employees, the commission said in a statement, adding that some involved in TRF sales did not have professional qualifications.
The bank must also settle disputes with clients and correct all negligence before it can resume TRF sales, the commission said.
Bank SinoPac’s punishment came after increased scrutiny of major banks showing rapid growth in their Treasury Market Unit (TMU) operations.
Commission Chairman William Tseng (曾銘宗) recently told banks not to take advantage of clients with risky and unnecessary products and services to boost fee income.
Sales of currency options and other derivatives accounted for more than 50 percent of TMU business at several banks, Tseng said.
The one-year suspension may not deal a serious blow to Bank SinoPac’s earnings, as it had slowed sales of financial derivatives prior to the punitive action, a company official said.
“TRF is just one of the many products for sale and TMU operations account for a modest share of SinoPac’s topline,” said the official, asking not to be named.
SinoPac Financial posted NT$5.15 million (US$170,247) in net income last month, the lowest among 15 listed peers, dragged down by a retained earnings tax of NT$670 million.
Bank SinoPac has extended an investment deal by one year with International Commercial Bank of China Ltd (ICBC, 中國工商銀行) under which the Taiwanese lender would sell 20 percent in shares to the Chinese partner through a private placement, he said.
The investment, due to expire today, would inject about NT$200 million in capital to Bank SinoPac, allowing it to increase lending by NT$300 billion, he said.
The investment may not proceed until the cross-strait service trade agreement clears the legislature.
SinoPac Financial shares closed flat at NT$13.7 yesterday, weaker than the TAIEX’s 0.71 percent rise, Taiwan Stock Exchange data showed.
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